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21
We repeat: Sangoma Technologies is still a strong buy today.
Posted by: Gerry Wimmer
5/21/2018
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TOP IDEAS: Sangoma Technologies Corp. (TSXV: STC) is up 425% with no hype, just strong financial results. The Company is cashed up and ready to make more acquisitions which will move the stock price higher yet again.




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 community.


Apologies if this blog sounds like a broken record when it comes to posting updates on Sangoma Technologies Corp. (TSXV: STC - C$1.10). But our message remains clear: This stock is significantly undervalued and continues to be an excellent buying opportunity for small cap investors.

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 reported its fiscal 2018 Q3 results for the period ended March 31, 2018. This reporting period includes the financial impact from the Company’s most recent acquisition of all of the key assets of New Jersey, USA-based Converged Communication Division from Dialogic Corporation.

Sangoma Technologies’ Q3 results are impressive. Revenues were C$16.24 million, 138% more than in the same quarter last year. The Company stated that this was the 13th quarter in row of higher revenue versus the year prior. EBITDA was C$1.9 million for the quarter, up 160%. Net income was C$750,000 with an EPS of C$0.015. The Q3 financial results far exceeded analyst expectations. Management increased its annual financial guidance (again) for fiscal 2018 to revenues exceeding C$55 million and EBITDA of C$6 million.

In Q3 the Company said that it generated almost C$2 million in cash from operations, boosting an already healthy balance sheet. Sangoma finished the quarter with a cash balance of about C$14 million and working capital of C$16.4 million as result of a C$13 million private placement of the Company’s stock at C$1.00 per share, which closed on March 15, 2018.

We view the Company’s cash holdings as a potential catalyst for the stock price. Sangoma’s Management has made six acquisitions over the last six years to scale the Company. We think that Management will be utilizing Sangoma’s cash holdings in 2018 to make another acquisition. This blog is of the opinion that the Company’s next purchase could be the largest acquisition to date, adding in excess of C$20 million of revenues annually.

Sangoma Technologies’ share price has risen 425% since we first recommended this stock (See: Sangoma Technologies: A small cap tech stock trading for value with prospects of growth) as one of our Top Ideas. While the stock price performance to date is strong, we think that what will be more impressive are the investment returns that are still to come for small cap investors who own the stock.

In our opinion, the current valuation of this stock does not take into account the transformation of Sangoma Technologies to a much bigger company. Based on the financial impact of recent acquisitions and the potential for more acquisitions, this stock still has significant upside potential. That is good news if you own the stock. If not, buy some!

The Company has approximately 47.1 million shares outstanding.

Sangoma Technologies website: www.sangoma.com

Author Ownership Disclosure: TSXV: STC - Yes


Read Disclaimer:

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.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.