TOP IDEAS: New product sales support
Sangoma Technologies Corp. (TSXV: STC) turnaround. Stock up 55% in 2014, with
more to come.
Last year Sangoma Technologies’ (TSXV: STC
- $0.325) management team was preaching its turnaround vision to shareholders:
That the anticipated revenue growth
(from sales of new products developed) and controlled but targeted spending
will lead to a healthy bottom line. Judging from the Company’s latest
quarterly report, this vision has become reality.
Sangoma reported that sales for the second quarter of fiscal
2014 were $3.63 million, up 32% from both the same quarter last year in fiscal
2013 and from the preceding quarter in the current fiscal year. More
importantly as Sangoma’s Management envisioned, all the sales growth reported
was being generated from the Company’s new products.
Sangoma is a
leading provider of hardware and software components that enable or enhance
Internet Protocol (IP) Communications Systems for both telecom and datacom
applications. With more
devices, networks, clouds and systems needing to interoperate, the Voice over
Internet Protocol (VoIP) communications landscape continues to grow in
complexity. To be a stronger competitor, the Company embarked on internal build
out of their product portfolio during the past 12-24 months. As such, the Company had accelerated the
rate of new product introduction and released many more products (21) to the
market than in prior years.
Sangoma has progressed from a company that
had historically released few new products each year, to a company capable of
delivering multiple new offerings annually in growing markets, Management has
said. Plans are for IP Communications product offerings in all the following
categories: wireless, optical networks, social, video and cloud. To sell the
new products the Company has increased its investment in sales to target all
key geographic regions and to address opportunities with larger customers such
as telecom carriers and OEMs.
The recent growth in sales has translated
into profits. For the second quarter
of fiscal 2014, Sangoma reported EBITDA of $430,000 compared to a loss in the
prior year quarter. The Company had a net income of $220,000 or approximately
$0.01 per share in earnings in Q2. Given the Company’s strong product gross
margins (67%) and tight control of expenses, further sales increases are
expected to have a very positive impact on future earnings growth.
We first recommended the purchase of
Sangoma shares as one of our Top Ideas for small cap value investors less than
2 months ago (See: Sangoma
Technologies: A small cap tech stock trading for value with prospects of growth).
Since then, the Company’s stock price has jumped 55%.
But the recent quarterly results only
reinforce the value proposition of this Company’s stock from its current
trading levels. Therefore we suggest small cap investors should continue to
accumulate Sangoma’s stock up to a price of $0.40 to capture additional
appreciation potential. Should the Company’s sales growth momentum continue to
accelerate so will Sangoma’s stock price to higher levels beyond $0.40 for
greater capital gains.
The Company continues to preserve its
strong balance sheet; holding $4.34 million in cash without any bank or
Sangoma Technologies has 28.8 million
Sangoma Technologies website: www.sangoma.com
Author Ownership Disclosure: TSXV: STC -
This article is for informational purposes only. This article is based on the
author's independent analysis and judgement 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.