Rising demand pushed up this small cap stock pick’s revenue in the latest quarter

Computer Modelling Group, symbol CMG on Toronto, sells software to clients in the oil and gas industry. It also provides consulting services.

The company is one of the small cap stock picks we analyze in our Stock Pickers Digest newsletter.

Computer Modelling’s software and services help its clients generate more cash flow by getting as much oil as possible from their existing wells. The company makes mostly recurring revenue from software licences and consulting contracts. That gives it long-term stability.

In its fiscal 2011 third quarter, which ended December 31, 2010, Computer Modelling’s revenue rose 3.4%, to $12.1 million from $11.7 million. That’s because the company sold more of its consulting services to new and existing customers. Software sales were flat. The higher Canadian dollar lowered revenue by about $0.6 million during the quarter.

Earnings fell 10.9%, to $3.6 million from $4.0 million a year earlier. Earnings per share dropped 13.0%, to $0.20 from $0.23. The company added employees to support its continued growth, and increased its research spending.

Computer Modelling holds cash of $38.0 million, and has no long-term debt. The company pays a quarterly dividend of $0.20 a share. The annual rate of $0.80 yields $3.2%.

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