Canadian Cloud Communications Stock Has Quietly Spoken to Investors

Shares of Sangoma Technologies Corporation (TSXV:STC) have climbed more than 30% since Capital Ideas first wrote about the company seven weeks ago

Capital Ideas Media | December 18, 2020 | SmallCapPower: Sangoma Technologies Corporation (TSXV:STC), a Canadian company founded in 1984, provides cloud-based and on-site communications products and services. An example of this would be cloud-hosted phone systems for smaller business and contact centers.

(Originally published on Capital Ideas Media on October 20, 2020)

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It sounds like a boring business, for sure, but one that’s produced some exciting longer-term returns for shareholders – 197% a year on average over the past five years.

[Editor’s Note: Shares of Sangoma Technologies have surged more than 30% since Capital Ideas wrote about the company seven weeks ago.]

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Sangoma Technologies has seen its sales steadily increase from $26.9 million in Fiscal 2017, to $57.4 million in 2018, to $109.65 million last year. Its EBITDA, meanwhile, has surged more than 373% over the past three years to $12.3 million in Fiscal 2019.

And, in August, the Company pre-announced full-year 2020 financial results, expecting revenue of between $131 million and $132 million (up 19% from last year), with EBITDA anticipated to exceed its previous guidance at more than $21 million (a greater than 70% year-over-year increase).

Perhaps more importantly, service revenue exceeded product revenue at Sangoma for the first time during the past quarter, steadily expanding to more than 50% of total revenue today. Its service revenue is both high margin and recurring.  

STC has some big-name clients, including Domino’s, Spotify, and AT&T, yet no individual customer represents more than 10% of the Company’s sales.

Finally, at the end of July 2020, Sangoma Technologies closed an $81 million bought deal equity financing at a price of $2.30 per share. This not only strengthens the Company’s balance sheet but also provides some ammunition for future acquisitions.

Four Bay Street analysts cover STC stock, all of which have “Buy” recommendations and two have target prices of $4 per share.

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