Tucows began as a startup software distribution company back in 1993 and has evolved and grown to various business services.
Tucows is now a provider of network access, domain names and other Internet services. Ting (https://ting.com) delivers mobile phone service and fixed Internet access with outstanding customer support. OpenSRS (http://opensrs.com) manages nearly 15 million domain names and millions of value-added services through a global reseller network of over 13,000 web hosts and ISPs. Hover (http://hover.com) makes it easy for individuals and small businesses to manage their domain names and email addresses. More information can be found on Tucows’ corporate website (http://tucows.com).
Tucows reported a fantastic earnings recently.
- Year-on-year EPS growth is 86%.
- 3 year and 5 year average growth is more than 40%.
- Overall revenue grew by 11% year-over-year.
- Gross Margin for Network Services for current quarter increases by 31%.
- Gross Margin for Domain Services for current quarter increases by 10%.
Total Network expenses increase by 23%.
Current growth plans:
- Ting Internet (4 towns underway)
- Ting mobile
- Holding for domain names
- High review for Ting Mobile and its customer service
- First mover advantage for their competitive pricing model
- Infra switching costs for their fixed internet
- Key people risk (CEO received a high 99% rating for glassdoor and is instrumental to the company’s success)
- Other big players might follow to offer pay as you use model
- Slight increase in Short interests
- Price as of recommendation: $27.45
- P/E: 20.4
- P/B: 9.8
- P/S: 1.7
- Price/Cash Flow: 19
- ROA: 10.56
- ROE: 46.5
- ROIC: 38.82
- Current Ratio: 0.85 (could be a red flag), from my understanding this is due to pre-paid subscription model for their domain services.
- PEG: 0.63
- D/E: 0.31
The company outlook is positive but there are some risks in their growth. The growth will depend how well they execute and grow in Ting.
Disclosure: I own a small position of shares in TCX.