TOP IDEAS: Based on the fundamentals and operations, Sangoma
Technologies’ (TSX: STC, NASDAQ: SANG) shares are very attractively priced
today before it is valued as a billion dollar Communications-SaaS/MSP company.
Investorfile’s first blog post introducing Sangoma Technologies (See: Sangoma
Technologies: A small cap tech stock trading for value with prospects of growth.),
the stock has returned a high-point investment gain of 2,377%.
While the share price has retreated
significantly from its all-time highs in this bear market, we can honestly say
that Sangoma Technologies is a better buy today than when Investorfile first
recommended the stock as one of our Top Ideas as a small cap value investment
Sangoma Technologies (TSX: STC - C$10.95, NASDAQ: SANG –
US$8.43 ) is a trusted leader
in delivering value-based Communications as a Service (CaaS) and Managed
Service Provider ("MSP") solutions for businesses of all sizes. Today
this Company provides the Industry’s most compressive cloud communications
suite and broadest product portfolio in the market, with the ability to provide
a full end-to-end communications solution for enterprise customers over the
cloud, on-premise or hybrid.
services provider, Sangoma has differentiated itself from competitors by being
a one-stop shop solution to the enterprise market and by providing a fully
integrated experience for support and cost savings to its customers. The
Company provides an array of cloud-based communication services, including
Unified Communication (UCaaS) business communications, Contact Center as a
Service (CCaaS), Video Meetings as a Service (MaaS), Collaboration as a Service
(CollabaaS), Communications Platform as a Service (CPaaS), Trunking as a
Service (TaaS), Fax as a Service (FaaS), Device as a Service (DaaS), Access
Control as a Service (ACaaS), Security as a Service (SaaS), SD-WAN Management
Services and Network Access as a Service.
What makes Sangoma Technologies such a
compelling investment today? First, based on the financial fundamentals, there
is the opportunity for small cap investors to be exposed to a very attractively
valued company that has a history of growth and profitability.
Based on analysts' consensus estimates for
Fiscal 2023 (which begins on July 1, 2022), Sangoma Technologies’ current share
price values this Company at about 1x annual revenues (US$290M @70-75%
recurring) and at 5.5x Adj. EBITDA. Given industry comparables and historical
averages of similarly sized technology growth companies, this valuation is
quite discounted. There is no argument with this fact.
addition to the Company’s financial fundamentals are the notable operational
highlights. Sangoma Technologies has a growing, diverse and globally distributed
customer base, comprised of over 100,000 enterprises in more than 100
countries, with no customer concentration risk. The Company says it has a 99%
customer retention rate, with a track record of long customer relationships,
tied to recurring revenue service contracts. Typical customers of Sangoma
include multi-location businesses and mid-sized enterprises across many
verticals. The Company reaches the majority of its customers through an
established channel partner-centric go-to-market strategy.
operational model generates strong financial metrics. A majority of the
Company’s revenues are derived from services, which equates to sustainable
recurring business. Its service business drives gross margins to an excess of
70%. Profitability is consistent with adjusted EBITDA margins as a percentage
of annual revenues in the 18-20% range.
2017, Sangoma has grown its revenue base significantly (62% Revenue CAGR), both
through organic and M&A driven growth. We expect high rates of growth will
continue. We note that the Company is an industry leader in consolidation. With
11 acquisitions to date, Management is proven in its ability to source;
finance, close and, most importantly, integrate the businesses it purchases.
Based on our analysis, expect a
continuation of Sangoma’s operational and financial performance. Therefore, in
time, a rerating of the Company’s valuation metrics will occur and Sangoma’s
market capitalization will exceed C$1 billion. For buy and hold small cap
investors, this means earning three times your investment if you purchase
Sangoma shares today.
stock was a big gainer the first time we recommended Sangoma Technologies. That
said, at Investorfile we think we have an even a better chance to be correct
The Company has approximately 33.3
million shares outstanding on a diluted basis.
Technologies website: www.sangoma.com
Ownership Disclosure: TSX: STC – Yes
share price accumulation target of $0.40 (pre-consolidation) for Sangoma
Technologies Corp. was initially reached on April 24, 2014.
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.