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Sangoma Technologies is delivering on its resiliency and promise
Posted by: Gerry Wimmer
5/31/2020
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TOP IDEAS: Sangoma Technologies’ (TSXV: STC) Unified Communications service offerings are the key to prospering in the new working reality of COVID-19. The stock's value is up 1000% since first recommended by Investorfile.




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.


It is not often that Investorfile composes a blog post on the same stock merely three months apart (See: The transformation of Sangoma Technologies to a services company sets it apart.) But, for Sangoma Technologies, we believe it deserves this attention because its business is weathering COVID-19 better than most and the longer-term demand for the Company’s Unified Communications service offerings looks stronger than ever.

Sangoma Technologies (TSXV: STC – C$2.30) describes itself as a trusted leader in delivering value-based Communications as a Service (CaaS) solutions for businesses of all sizes, service providers and OEMs. Sangoma’s offerings include Unified Communication (UCaaS) and Call Center as a Service (CCaaS) business phone systems, both on-premise and in the cloud, Communications Platform as a Service (CPaaS), SIP trunking services (TaaS), and telephony hardware, which can also be deployed as a service.

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, remote conference and video 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.

Prior to the onset of COVID-19, there were remote conferencing and collaboration tools available without the same priority of usage. There was a need for them; however, it wasn’t a pressing one and enterprises having access to UC infrastructure, either on-premise or though the cloud and latest remote telecommunication hardware and software tools was essentially a nice-to-have. But that has changed, and such service and tools is now considered essential and will likely remain that way in the future. 

Even when a vaccine for COVID-19 becomes available, it seems certain that working practices and set up will not return to what they were prior to March 2020 and remote working will become the norm. That said we believe that enterprises will continue to invest in their UC infrastructure, which is a tailwind for Sangoma’s services.

We noticed that Sangoma Technologies has financially continued to perform well through these uncertain times, and fiscal Q3 results (for the period ending March 31) were quite positive, as both revenues and earnings growth where ahead of analysts' consensus expectations. Most notably was the growth in the Company’s recurring revenues, which now make up over 50% of total revenues and is the foundation for future growth and profitability.

Investorfile does not want to underestimate the economic impact of COVID-19 (and the possibility of a second wave). But aside from Sangoma management's proactive cost-savings initiatives, (discussed in detail during Company’s recent investor conference calls), we are of the opinion that Sangoma’s resilient business model, 50%+ recurring revenue base, significant customer and geographic diversification and the fact that it is a provider of a mission-critical essential communications service, still provides downside protection and upside potential for small cap investors.

We note that Management has reconfirmed Sangoma’s 2020 annual financial guidance (the fiscal period which ends on June 30) with revenues and EBITDA range of C$128-$132 million and C$19-$21 million respectively.

Last week, most analysts covering Sangoma Technologies raised their 12-month stock price targets, the highest now set at C$3.50 per share.

Sangoma Technologies has been a "top performing” Top Idea of Investorfile for several years now and our expectation is it will continue to be. Despite COVID-19, the stock price is up 1000% since we first recommended the shares as small cap value investment opportunity. (See: Sangoma Technologies: A small cap tech stock trading for value with prospects of growth.)

The Company has approximately 73.7 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.