STC) Is Worth After Its Latest Results

STC) Is Worth After Its Latest Results

It’s been a mediocre week for Sangoma Technologies Corporation (TSE:STC) shareholders, with the stock dropping 11% to CA$6.12 in the week since its latest first-quarter results. Results look to have been somewhat negative – revenue fell 3.6% short of analyst estimates at US$64m, although statutory losses were somewhat better. The per-share loss was US$0.06, 49% smaller than the analysts were expecting prior to the result. Following the result, the analysts have updated their earnings model, and it would be good to know whether they think there’s been a strong change in the company’s prospects, or if it’s business as usual. With this in mind, we’ve gathered the latest statutory forecasts to see what the analysts are expecting for the next year.

Check out our latest analysis for Sangoma Technologies

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Taking into account the latest results, the current consensus from Sangoma Technologies’ eight analysts is for revenues of US$277.9m in 2023, which would reflect a decent 17% increase on its sales over the past 12 months. The loss per share is expected to greatly reduce in the near future, narrowing 91% to US$0.47. Before this latest report, the consensus had been expecting revenues of US$278.4m and US$0.33 per share in losses. So it’s pretty clear the analysts have mixed opinions on Sangoma Technologies even after this update; although they reconfirmed their revenue numbers, it came at the cost of a massive increase in per-share losses.

The consensus price target fell 11% to CA$16.90per share, with the analysts clearly concerned by ballooning losses. There’s another way to think about price targets though, and that’s to look at the range of price targets put forward by analysts, because a wide range of estimates could suggest a diverse view on possible outcomes for the business. Currently, the most bullish analyst values ​​Sangoma Technologies at CA$24.17 per share, while the most bearish prices it at CA$12.00. Note the wide gap in analyst price targets? This implies to us that there is a fairly broad range of possible scenarios for the underlying business.

Taking a look at the bigger picture now, one of the ways we can understand these forecasts is to see how they compare to both past performance and industry growth estimates. We would highlight that Sangoma Technologies’ revenue growth is expected to slow, with the forecast 24% annualized growth rate until the end of 2023 being well below the historical 39% pa growth over the last five years. Juxtapose this against the other companies in the industry with analyst coverage, which are forecast to grow their revenues (in aggregate) 6.1% per year. So it’s pretty clear that, while Sangoma Technologies’ revenue growth is expected to slow, it’s still expected to grow faster than the industry itself.

The Bottom Line

The most important thing to note is the forecast of increased losses next year, suggesting all may not be well at Sangoma Technologies. Happily, there were no major changes to revenue forecasts, with the business still expected to grow faster than the wider industry. Furthermore, the analysts also cut their price targets, suggesting that the latest news has led to greater pessimism about the intrinsic value of the business.

With that in mind, we wouldn’t be too quick to come to a conclusion on Sangoma Technologies. Long-term earnings power is much more important than next year’s profits. We have forecasts for Sangoma Technologies going out to 2024, and you can see them free on our platform here.

You still need to take note of risks, for example – Sangoma Technologies has 3 warning signs we think you should be aware of.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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