Data Communications Management starts a Partial Recovery

Yes, the train is leaving the station.Data Communications Management reported it's second quarter results  on August 11and there is evidence of a partial recovery.But only a partial recovery as 5 years ago DCM traded at $25-$30 and 3 years ago it traded at $10.So Data Communications has a successful history behind it.That aside DCM stock price has been as low as $.10 in 2020 as the pandemic took it's toll on  the DCM stock price.

Second Quarter Highlights

Revenue was actually down in Q2 to $64 million from $70 million in 2019.However this was offset by a higher gross margin- from 23% up to 31%.Consequently adjusted EBITDA was up 203% to $14 million for Q2 and $24 million for the first half.This had a big impact on net income which went from a $4 million loss to a $4 million profit in Q2 and $6 million profit for the first half.This translates into $.14 earnings per share for the first half.This blog forsees e.p.s of .28-$.30 for 2020.A P/E ratio of as low as 3 will send the stock price to the $1.00- $1.25 area.             

More Work to Do

Data Communications Management has a very clean balance sheet.It picked up some small printing operations in 2018 but has cleared down it's debt.It picked up a small telco in 2019 and this has allowed it to raise it's gross margin.But it still only has 43 million shares outstanding.And it even got a government subsidy of $6 million in 2020.However some new shares may have to be raised for it's new potential acquisition of Informetrica.And this blog sees one or two new partners in the near future.It is possible that because of the acquisition price they both may be immediately accretive to net income.But this will not likely make total shares outstanding more than 50 million.And  that will not dilute earnings tremenduously.

Changing their Product Mix

5years ago when DCM was trading around $30 it was getting a lot of government printing contracts.Now much of this has dried up but DCM still gets printing contacts and presentations.But in the last 18 months or so it is getting more and more telecom customers.And soon it will get new data analysis work also.The gross margins are higher here.And this makes a nice blend of business.Revenues will not be as high as in the past but net income will continue to grow.DCM will not be at $25 soon but it has started a partial recovery.

Investors should look closely at Q3 results.It needs a good quarter here.A good quarter will put Data Communications on track to hit $.28-$.30 e.p.s for 2020.That will be a good time to buy as DCM heads towards $1.00-$1.25 per share.         https://www.fool.com/

Sangoma Technology's Annual Report shows it's Flush with Cash

         On August 13 Sangoma Technology (STC) released an update on it's annual results for 2020.These are unaudited results for the yearend of June 30.And on August 14, STC stock moved up 12% to $2.73 per share.Investors saw a number of things in this report that they liked.First sales are expected to be $133 million for a 22% increase over 2019.And 2019 sales were up almost 50% from 2018.Secondly Sangoma tells shareholders that EBITDA will be at the upper end of their annual guidance,that is,$21 million.Guidance was for $19-$21 million EBITDA.No information was given on forecasted net income or e.p.s.But investors can see that even with the slowdown caused by the pandemic Sangoma showed excellent results.The press release pointed out that there was a softening of it's product sales but there were strong service sales.

         Annual Highlights

   Clearly the biggest surprise was the growth in revenues when the economy was in a very slow phase.In fact, the growth since 2018 is almost 250%.That is because Sangoma made 2 important acquisitions in late 2018 and 2019.And it usually takes more time for new divisions to mesh with older divisions and older products.But another large surprise was that STC raised $80 million in 2020.This represents 33% of it's market capitalization in one year.And is an excellent accomplishment for a small cap.STC says that $9 million of the new funds will be used to pay off  their credit facilities.

                                             

 

     The Year Ahead  

     Now STC is sitting in a good position with $70 million in cash and little debt.Some of this cash will be invested in it's present operation to foster organic growth.But there will be lots left over to make acquisitions.Sangoma may already have it's eye on a likely candidate now.But there are a number of listed small caps in it's space with reasonable Price to Earnings ratios.And there is a plethora of junior  techs that are unlisted that are very inexpensive to buy.The benefit of juniors that are unlisted is that they often have new technologies to bring with them.But new revenues are hard to get with a junior technology company.So perhaps the best suggestion for new acquisitions is to take one of each - a junior listed telecom company and a junior unlisted telecom based company.

                 https://www.fool.com/