TOP IDEAS: Despite being up 105%, double digit revenue and
profit growth make Sangoma Technologies Corp. (TSXV: STC) share price still notably
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
It has taken about three years for the stock price of
Sangoma Technologies Corp. (TSXV: STC - $0.43) to rise and maintain 100% in
gains since the Investorfile blog first introduced the Company to our list of
Top Ideas (See: Sangoma
Technologies: A small cap tech stock trading for value with prospects of growth.)
But going forward, the next 100% in gains may come a lot quicker based on the
recent quarterly financial results and guidance.
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.
In our last Sangoma Technologies blog post on October 30, 2016
Technologies transformation makes it bigger and better for a profitable 2017)
we reiterated our buy recommendation of the Company’s shares. This was
based on the growing revenue base being generated from the build out of
Sangoma’s Software as a Service (SaaS) and Cloud-based services, to become a
provider of Unified Communications (UC) solutions that earn
predictable recurring streams of revenues. As revenues increase we had expected
that the Company’s profitability will strengthen in fiscal 2017 and so
far, we have not been disappointed.
Last week Sangoma
Technologies released its Q2 results for fiscal 2017. In Q2, Sangoma reported
that quarterly revenues jumped 29% to C$6.57 million. The Company earned a net
income of C$290,000 or about C$0.01 earnings per share for the quarter.
Most impressive was the growth in EBITDA (11.6% of sales) in Q2, up 85%
to C$760,000. When sales and gross profit grow faster than spending, EBITDA
margins expand, generating bigger profits.
Our biggest takeaway from the Q2 news release is that for
the first time Sangoma’s Management has established future earnings guidance
for investors. It says, "For the fiscal year 2017 (ending June 30),
Sangoma expects revenue of approximately $25 million with EBITDA of about $2.4
million. Further, for fiscal 2018 Sangoma expects revenue to grow about 15-20%
and for EBITDA to exceed 10% as a percentage of sales.”
Despite that the stock has surpassed our share price
accumulation target of $0.40 and is up 105% to date, based on the guidance
for fiscal 2018, the Company’s stock trades today under five times Enterprise
Value (EV) to EBITDA. That said the Investorfile blog still believes that the
stock price of Sangoma is notably undervalued and looking forward could support
a much higher valuation almost double its current trading price. Therefore we feel that the next 12-months should be a
very rewarding period for investors in this Company.
It is often said that the first 100% gain on an investment is
a lot harder to earn then the next 100%. This may hold true for shareholders of
Technologies maintains a strong balance sheet with a healthy net cash position.
The Company has approximately 32.4 million shares
Sangoma Technologies website: www.sangoma.com
Author Ownership Disclosure: TSXV: STC - Yes
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
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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.