Computer Modelling Group (TSX:CMG) - Still profitable and bouncing off 5-year lows

Computer Modelling Group (TSX:CMG) - Still profitable and bouncing off 5-year lows I thought today I will start a discussion about a stock not talked about much in this forum. Its a bit of an unusual odd ball name. If you’ve spent any time poking around Canadian tech, you know it’s mostly a wasteland of overhyped turnaround stories and Shopify wannabes. Sitting quietly in Calgary, though, is Computer Modelling Group (TSX:CMG), a small specialized outfit that builds sophisticated reservoir simulation and seismic interpretation software for oil & gas producers. Their software helps oil and gas engineers figure out what's happening miles underground without drilling expensive dry holes. It’s essentially the high-end physics engine of the petroleum world. Because ripping out reservoir software is about as appealing to an energy major as an unannounced root canal, CMG enjoys a sticky, switching-cost-driven economic moat. The stock currently trades around C$4.00, giving it a market cap near C$312 million. That’s down sharply from its mid-2024 peak near C$14.50. Today, the trailing price-to-earnings sits around 21x, with forward P/E closer to 16.4x and a price-to-sales of 2.6x. If you normalize things against its own history, where it routinely commanded a P/E over 25x and price-to-sales near 7x, it looks cheap. But before you go remortgaging the house, there’s a reason Mr. Market has sent this thing to the bargain bin. Top-line revenue jumped from roughly C$74 million in 2023 to C$126 million in fiscal 2026, largely powered by acquisitions like Bluware. However, operating margins collapsed from historical highs around 40% to 45% down to barely 21% today. Free cash flow per share fell from C$0.43 per share in 2024 to C$0.23 over the trailing twelve months. Recent quarters have been messy: June 2026 net income plummeted nearly 60% year-over-year on declining quarterly revenues. The balance sheet isn’t bankrupt, but with cash down to C$21 million and total debt near C$43 million, the cash-to-debt ratio sits at a mediocre 0.49. Throw in dividend cuts that brought the annual payout down to C$0.04 per share, and yield chasers have officially left the building. When it comes to the ownership registry, there’s no single controlling oligarch pulling all the strings from a superyacht. Institutional investors own roughly 38% of the float, leaving plenty of liquidity in the hands of the market. Interestingly, while retail sentiment has been in the gutter, the boardroom has been busy. Over the summer of 2026, insiders went on an absolute shopping spree. Directors Alexander Davern, Anuroop Duggal, and Pramod Jain collectively soaked up hundreds of thousands of shares in June, alongside buying from senior officers. The folks with the best seats in the house clearly think this selloff is overdone, but until CMG proves it can digest its acquisitions, halt margin bleed, and turn quarterly profits back around, expect the ride to stay bumpy. CMG remains a specialized, niche beast. CMG is still genuinely profitable, generating double-digit returns on equity and solid gross margins above 80%. It just happens to be chained to the capital expenditure cycles of global oil and gas producers rather than the high-flying enterprise cloud hype train. The oil & gas industry is notoriously boom and bust. However the recent boom caused by the Iran war has the industry feeling flush again. Explorations is likely to ramp up and the industry is starting to spend on capex again. The stock has a tendency to double and quadruple when the oil capex money starts flowing again.