UCaaS firm has scope to narrow unfair UK growth discount
Thursday 14 Jan 2021 Author: Steven Frazer


Gain to date: 9.4%

Original entry point: Buy at £14.95, 9 July 2020

Guiding investors towards sensible targets and then beating them is a very good habit for a stock to develop and it’s a box that Gamma Communications (GAMA:AIM) ticks.

The company recently revealed that earning for 2020 would be ‘slightly ahead’ of forecast with revenue at the top of the range.

The consensus range had been pitched at revenue of between £371.8 million to £396.7 million, adjusted EBITDA (earnings before interest,tax, depreciation and amortisation) of £73.9 million to £76 million.

The scale of the beat may be modest but as analysts at Megabuyte point out, organic revenue growth close to double-digits during this pandemic is ‘impressive’.

To remind readers, Gamma is a Unified Communications-as-a-Service (UCaaS) supplier, providing 21st Century cloud-based, integrated systems with access to the latest tools and apps. This is one of the few a growth areas in the otherwise mature telecoms space and is where US stock star Twilio has proved a real Covid winner. Its stock surged 250% in 2020 and now trades on a near-3,000 PE.

Maybe Gamma doesn’t deserve to be rated like that but it puts its own 12-month PE of 28.1 from a modest-looking 20% share price run into sharp relief.

SHARES SAYS: A quality business still worth buying for the long-run. [SF]

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