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Feb
10
Sangoma Technologies could be a C$2.50 stock this year
Posted by: Gerry Wimmer
2/10/2019
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TOP IDEAS: Awarded the Canadian Technology Stock of the Year for 2018, Sangoma Technologies’ (TSXV: STC) shares are up 682% in value. The stock price has momentum as awareness from new investors keeps building.




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.


This marks our tenth blog post about Sangoma Technologies Corp. (TSXV: STC - C$1.64) since Investorfile first recommended this stock at C$0.21 (See -Sangoma Technologies: A small cap tech stock trading for value with prospects of growth). Since that first blog post, the shares have appreciated 682% in value with more upside on the horizon.

Over the past several years, our message in each of our Sangoma Technologies blog posts has been very consistent: This stock is significantly undervalued and continues to be an excellent buying opportunity for small cap investors. Looking back, we must have been right. The Company’s shares have appreciated in value in the months following each post. Hence, we have written another post to help keep the momentum going!

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 such as 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.

In our last blog post in May of 2018 (See - We repeat: Sangoma Technologies is still a strong buy today) we prognosticated that the Company could be on the verge of making its largest acquisition to date. A couple of months later we were proven right when Sangoma Technologies acquired its US competitor, Digium Inc. This was a transformational acquisition which has almost doubled the size of the Company. Post acquisition, Sangoma’s Management stated that the Company should generate annual revenues in excess of C$100 million for fiscal 2019, which will end on June 30.

Since the acquisition of Digium, Sangoma’s Management team has been busy integrating the two companies to maximize operating efficiencies. While this is no easy task, according to Management reports, the integration process is proceeding well. As such, the investment community is beginning to recognize the achievements of the Company’s acquisition strategy. Case-in-point: Sangoma Technologies was recognized with the 2018 Award at the Cantech Investment Conference by being selected as the Technology Stock of the Year (TSXV); Sangoma Technologies was named to the 50 top Canadian stock picks for 2019 as chosen by the pros – from MoneySense; Both Acumen Capital and Cormark Securities proclaim Sangoma Technologies to its 2019 list of Top Picks for Canadian small cap stocks.

The Investorfile blog has long felt that Sangoma’s share price remained undervalued. But we feel that the "value gap” will begin to close as awareness of the Company’s stock builds, which it is doing. If this value is realized, we forecast the stock price could reach C$2.50 this year. This valuation is supported by our analysis on appropriate revenue multiples and Enterprise Value to EBITDA multiples based on fiscal 2020 (which begins on July 1st) analyst expectations and financial guidance, which was publicly disclosed by Company management. That said we believe there is still over 50% upside for the stock price this year based on current trading levels excluding further appreciation potential from future acquisitions, should they occur.

We remain bullish on the prospects for Sangoma Technologies. For two years running this stock has been on our annual Top Pick list among our Top Ideas (See: Investorfile top pick performer in 2018 may repeat gains in 2019).

The Company has approximately 51.5 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.