TOP IDEAS: Believe it or not, with the
stock up 329%, Sangoma Technologies Corporation (TSXV: STC) is still largely
undiscovered and undervalued despite its fast growth and profitability.
Investorfile's share price accumulation target of $0.40 for Sangoma
Technologies Corp. was reached on April 24, 2014. For the record, we do not
revise share price targets for our Investorfile Top Ideas - Small Cap Value
Stocks. We have positioned our blog to be one of the first providers of a
pragmatic perspective of a small cap company stock's potential worth, where
there may be uncovered value that has been largely overlooked by the investment
Sorry, investors: Sangoma
Technologies Corporation (TSXV: STC - C$0.90) is not a blockchain or marijuana
company. But if you like a small cap stock with big revenue growth and profits
that is still cheap, look no further.
Sangoma Technologies delivers Unified
Communications solutions for SMBs, Enterprises, OEMs, Carriers and service
providers. The Company’s scalable offerings include both on-premises and
cloud-based phone systems, telephony services and industry-leading
Voice-Over-IP solutions which, together, provide seamless connectivity between
traditional infrastructure and new technologies. Sangoma's products and
services are used in leading PBX, IVR, contact centre, carrier networks and
data communication applications worldwide.
Unified Communications (UC) is a
fast-growing market within the telecommunications industry. UC implies the
integration between modes of communications like text messages, cell phone,
emails, conference calls, instant messaging, screen sharing, etc., as well as
being able to switch effortlessly between them to enhance the exchange of
information and ideas for a business operation.
Last week, Sangoma Technologies announced the
acquisition of all of the key assets of the New Jersey, USA-based Converged
Communication Division from Dialogic Corporation.
This acquisition is the Company’s sixth in six years, is expected to be
immediately accretive to earnings and will add approximately C$15 million of
revenues over the next 12 months.This transaction (C$5.7 million in cash)
was financed internally without dilution to shareholders. It was just six
months ago when Sangoma Technologies bought VoIP Supply LCC, located in
Buffalo, New York, which is also expected to add C$15 million to the Company’s
revenue base annually and is accretive to the Company’s earnings.
Due to rapid growth over the past 12 months, Sangoma
has been consistently increasing its financial guidance to the market. Last
week, the Company’s Management upped its fiscal 2018 estimates (which ends June
30) again for both revenues and EBITDA. Sangoma had previously
provided financial guidance of $46 million in revenue and $4 million in EBITDA.
Based upon consolidating results of the Converged Communication acquisition for
the third and fourth financial quarters of fiscal 2018, it is expected that
this transaction will increase the Company’s revenue to at least $53 million
and EBITDA in excess of $5.5 million. No doubt, the financial guidance will be
higher for fiscal 2019 (begins on July 1) to account for the full the 12-month
impact of the recent acquisitions.
The Investorfile blog is happy to report that Sangoma
Technologies’ share price has risen 329% since we first recommended this stock
Technologies: A small cap tech stock trading for value with prospects of growth)
as one of our Top Ideas. To date, the investment return is impressive. More
impressive may be the investment returns that are still to come.
Last year we posted three updates on the Company for small cap investors to consider:
February 2017: (Sangoma
Technologies’ stock price has room to double again), May 2017: (Sangoma
Technologies is on a roll and the stock is up 240%) and October
Technologies stock price has lots of room to run), all reiterating
our bullish view on the stock while the shares progressively gained in value.
Today, the Investorfile blog believes that the current
valuation of the stock does not reflect the transformation of Sangoma
Technologies based on the financial impact of recent acquisitions and the
potential for more acquisitions (M&A) to drive further upside. The impact
of M&A and, coupled with interest from institutional investors, we believe will drive the strongest inflection point to the value of the stock price
That said, Sangoma
Technologies is still a strong buy and we ask small
cap investors (who are not shareholders) what they are waiting for.
Note: Last week Beacon Securities and
Cormark Securities increased their 12-months share price targets for this
stock to C$2.00 and C$1.75 respectively.
The Company has approximately 33.8 million
Author Ownership Disclosure: TSXV: STC -
This article is for informational purposes only. This article is based on the
author's independent analysis and judgment and does not guarantee the
information's accuracy or completeness. The information contained in this
article is subject to change without notice, and the author assumes no
responsibility to update the information contained in this article. The
information contained within this article should not be construed as offering
of investment advice. Those seeking direct investment advice, should consult a
qualified, registered, investment professional. This is not a direct or implied
solicitation to buy or sell securities. Readers are advised to conduct their
own due diligence prior to considering buying or selling any stock.
Investorfile.com is not
engaged in an investor relations agreement with Sangoma Technologies
Corporation nor has it received any compensation from Sangoma Technologies
Corporation for the preparation or distribution of this article.
The author of this article has
acquired and may trade shares of Sangoma Technologies Corporation through open
market transactions and for investment purposes only.