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Is Sangoma Technologies (USA Stocks:SANG) ready for a correction?

December 11, 2024  By Gabriel Shpitalnik
Macroaxis Story
When it rains, it pours, and for Sangoma Technologies Corp, the recent uptick in stock price might just be the start of a more significant surge. This NASDAQ-listed company, operating within the Software - Infrastructure sector, has caught the eye of investors with its over 1% gain. However, a deeper dive into its financials reveals a complex picture. Despite a market capitalization of $216.7 million, Sangoma faces challenges, such as a net income loss of $8.7 million from continuing operations and a probability of bankruptcy standing at 61.79%. On the brighter side, the company boasts a cash flow from operations of $44.25 million, indicating some financial resilience. With a current ratio of 0.78X, the company may need to bolster its liquidity to sustain growth. As investors weigh these factors, the question remains: is this the beginning of a larger rally, or just a fleeting moment of optimism? With growing interest in the software sector, Sangoma Technologies Corp. deserves a closer look. However, given the current market volatility, it's understandable why some investors might be hesitant. The key question is whether Sangoma's valuation is justified. Let's explore this to provide a clearer perspective on whether investing in this stock makes sense.
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Reviewed by Rifka Kats

Sangoma Technologies Corp (SANG) recently experienced a modest gain of over 1%, sparking curiosity about its potential for a more significant rally. From a valuation perspective, the stock's price-to-book ratio of 0.83X suggests it might be undervalued compared to its book value per share of 7.70. However, with a net income loss of 8.6M and a probability of bankruptcy at 61.79%, investors should weigh these risks carefully before jumping in.

Major Takeaways

Sangoma Technologies Corp has liabilities totaling $89.11 million and a Debt to Equity (D/E) ratio of 0.42, which is fairly typical for its industry peers. We offer insights to enhance the current expert consensus on Sangoma Technologies. Our recommendation engine uses a sophisticated algorithm to evaluate the company's growth potential, considering all available technical and fundamental data.
We determine the current worth of Sangoma Technologies Corp using both absolute as well as relative valuation methodologies to arrive at its intrinsic value. In general, an absolute valuation paradigm, as applied to this company, attempts to find the value of Sangoma Technologies Corp based exclusively on its fundamental and basic technical indicators. By analyzing Sangoma Technologies's financials, quarterly and monthly indicators, and related drivers such as dividends, operating cash flow, and various types of growth rates, we attempt to find the most accurate representation of Sangoma Technologies's intrinsic value. In some cases, mostly for established, large-cap companies, we also incorporate more traditional valuation methods such as dividend discount, discounted cash flow, or asset-based models. As compared to an absolute model, our relative valuation model uses a comparative analysis of Sangoma Technologies. We calculate exposure to Sangoma Technologies's market risk, different technical and fundamental indicators, relevant financial multiples and ratios, and then comparing them to Sangoma Technologies's related companies.

Sangoma Technologies Corp Investment Alerts

Sangoma investment alerts and warnings help investors to get more proficient at understanding not only critical technical and fundamental signals but also the significant portfolio-centered indicators. These indicators include beta, alpha, and other risk-related measures that will help you in monitoring Sangoma Technologies Corp performance across your portfolios.Please check all investment alerts for Sangoma

Sangoma Technologies Valuation Ratios as Compared to Competition

Our valuation model uses many indicators to compare Sangoma value to that of its competitors to determine the firm's financial worth. You can analyze the relationship between different fundamental ratios across Sangoma Technologies competition to find correlations between indicators driving the intrinsic value of Sangoma.

Sangoma Technologies Gross Profit

Sangoma Technologies Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Sangoma Technologies previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Sangoma Technologies Gross Profit growth over the last 10 years. Please check Sangoma Technologies' gross profit and other fundamental indicators for more details.

Breaking it down a bit more

The current rise in Sangoma Technologies Corp short term price appreciation created some momentum for stockholders as it was traded today as low as 6.39 and as high as 6.5 per share. The company directors and management have successfully maneuvered the company at convenient times to take advantage of all market conditions in November. The stock standard deviation of daily returns for 90 days investing horizon is currently 2.97. The current volatility is consistent with the ongoing market swings in November 2024 as well as with Sangoma Technologies Corp unsystematic, company-specific events.
 2021 2022 2023 2024 (projected)
Gross Profit156.9M172.8M172.8M181.5M
Total Revenue224.4M252.5M247.3M259.6M
Gross ProfitTotal Revenue

Margins Breakdown

Sangoma profit margins show the degree to which it makes money. Margin indicators are used not only by investors but also by creditors or Sangoma Technologies itself as indicators of financial health and management effectiveness. Please look more closely at the different varieties of Sangoma Technologies profit margins.
2.12
Operating Profit Margin
0.5
Gross Profit Margin
Pretax Profit Margin5.31
Operating Profit Margin2.12
Net Profit Margin(2.0)
Gross Profit Margin0.5
Sangoma Technologies Price To Sales Ratio is decreasing over the last 8 years.
The current value of Sangoma Technologies Price To Sales Ratio is 1.54. Also, Sangoma Technologies Market Cap is increasing over the last 8 years. The current value of Sangoma Technologies Market Cap is 100,000. Price is what you pay. Value is what you get, said Warren Buffett, and this sentiment rings true for Sangoma Technologies Corp (SANG) as it experiences a modest gain of over 1%. With a current market capitalization of $216.68 million and a price-to-book ratio of 0.83, the stock appears undervalued compared to its book value per share of $7.70. However, potential investors should be cautious of the company's challenges, such as its operating margin of 0.01 and a net income loss of 8.6 million. While the stock's beta of 1.69 suggests higher volatility, the potential upside of 5.47 might entice those willing to embrace the risk for a possible rally..

Sangoma is expecting lower volatility in January

Sangoma Technologies is currently facing a volatility increase of over 6.1%, suggesting a turbulent period for the stock. However, the company expects market conditions to stabilize as January nears, which could offer a more predictable environment for investors. This anticipated calm might be a good moment to reevaluate or consider new investments in the stock. With a below-average downside deviation, an Information Ratio of 0.08, and a Jensen Alpha of 0.3, Sangoma Technologies presents a mixed risk profile. Understanding these volatility metrics can help investors make informed decisions, especially during market fluctuations.
In bear markets, heightened volatility can affect Sangoma's stock price, prompting investors to adjust their portfolios by diversifying their holdings as prices drop.Sangoma Technologies Corp has seen a modest uptick, but the real question is whether this momentum can be sustained. Analysts appear optimistic, with a strong buy consensus and a potential upside price target of 9.6. This suggests there could be room for further growth beyond the recent 1 percent boost. However, it's essential to weigh this potential against the risks, considering the broader market conditions and Sangoma's fiscal strategies. With a valuation real value of 8.37, investors might find this an attractive entry point if they believe in the company's long-term prospects. As always, thorough due diligence is key before making any investment decisions..

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Editorial Staff

Gabriel Shpitalnik is a Member of Macroaxis Editorial Board. Gabriel is a young entrepreneur and writes predominantly on the business, technology, and finance sector. He likes to analyze different equity instruments across a wide range of industries focusing primarily on consumer products and evolving technologies. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Gabriel Shpitalnik do not own shares of Sangoma Technologies Corp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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