TOP IDEAS: Believe it or not, with the stock up 329%, Sangoma Technologies Corporation (TSXV: STC) is still largely undiscovered and undervalued despite its fast growth and profitability. 

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.

Sorry, investors: Sangoma Technologies Corporation (TSXV: STC - C$0.90) is not a blockchain or marijuana company. But if you like a small cap stock with big revenue growth and profits that is still cheap, look no further.

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 like 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.

Last week, Sangoma Technologies announced the acquisition of all of the key assets of the New Jersey, USA-based Converged Communication Division from Dialogic Corporation. This acquisition is the Company’s sixth in six years, is expected to be immediately accretive to earnings and will add approximately C$15 million of revenues over the next 12 months.This transaction (C$5.7 million in cash) was financed internally without dilution to shareholders. It was just six months ago when Sangoma Technologies bought VoIP Supply LCC, located in Buffalo, New York, which is also expected to add C$15 million to the Company’s revenue base annually and is accretive to the Company’s earnings.

Due to rapid growth over the past 12 months, Sangoma has been consistently increasing its financial guidance to the market. Last week, the Company’s Management upped its fiscal 2018 estimates (which ends June 30) again for both revenues and EBITDA. Sangoma had previously provided financial guidance of $46 million in revenue and $4 million in EBITDA. Based upon consolidating results of the Converged Communication acquisition for the third and fourth financial quarters of fiscal 2018, it is expected that this transaction will increase the Company’s revenue to at least $53 million and EBITDA in excess of $5.5 million. No doubt, the financial guidance will be higher for fiscal 2019 (begins on July 1) to account for the full the 12-month impact of the recent acquisitions.

The Investorfile blog is happy to report that Sangoma Technologies’ share price has risen 329% since we first recommended this stock (See: Sangoma Technologies: A small cap tech stock trading for value with prospects of growth) as one of our Top Ideas. To date, the investment return is impressive. More impressive may be the investment returns that are still to come.

Last year we posted three updates on the Company for small cap investors to consider: February 2017: (Sangoma Technologies’ stock price has room to double again), May 2017: (Sangoma Technologies is on a roll and the stock is up 240%) and October 2017: (Sangoma Technologies stock price has lots of room to run), all reiterating our bullish view on the stock while the shares progressively gained in value.

Today, the Investorfile blog believes that the current valuation of the stock does not reflect the transformation of Sangoma Technologies based on the financial impact of recent acquisitions and the potential for more acquisitions (M&A) to drive further upside. The impact of M&A and, coupled with interest from institutional investors, we believe will drive the strongest inflection point to the value of the stock price in 2018.

That said, Sangoma Technologies is still a strong buy and we ask small cap investors (who are not shareholders) what they are waiting for.

Note: Last week Beacon Securities and Cormark Securities increased their 12-months share price targets for this stock to C$2.00 and C$1.75 respectively.

The Company has approximately 33.8 million shares outstanding.

Sangoma Technologies website: www.sangoma.com

Author Ownership Disclosure: TSXV: STC - Yes

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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.