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Eye on Tucows Inc with its long history of healthy growth

16.02.2016 • About Tucows Inc ($TC) • By InTwits

Tucows Inc is an attractive growth stock in Communications industry. Its revenue performance, profitability and healthy financial model stands it out vs. other public companies on the market.

Growth story

Tucows Inc showed fast growth in the last financial year. Tucows Inc's revenue surged on 17.1% in FY2015. EBITDA also increased considerably: 50.9% for the same period.

In the last 3 years the company showed fast revenue growth of 14.7% from 2012 to 2015 annually. EBITDA surged on 38.9% from 2012 to 2015 annually.

Tucows Inc ($TC) financials for the last 5 years

mln. $ 2011 2012 2013 2014 2015
Revenue growth, %18.2%13.3%13.6%17.1%
Gross margin, %29.9%27.8%28.5%27.5%30.8%
SG&A, %13.3%14.9%16.2%16.9%
EBITDA growth, %28.2%17.5%51.1%50.9%
EBITDA margin, %5.90%6.41%6.64%8.83%11.4%
Net Income644611
Net Income margin, % 6.36%3.86%3.22%4.32%6.58%
CAPEX/Revenue, %0.877%0.869%1.04%0.482%1.72%
Net Debt/EBITDA-1.0x-0.4x-0.7x-0.6x-0.2x
ROIC, %12.8%17.7%22.5%35.4%51.4%
ROE, %22.7%15.5%15.6%20.4%36.7%

Profitability and return on investment

Margin expansion supported EBITDA growth. The company's EBITDA margin surged on 2.60 pp from 8.80% to 11.4% in 2015. In the last 3 years Tucows Inc's EBITDA margin surged on 5 pp from 6.40% in 2012 to 11.4% in 2015.

Tucows Inc shows attractive ROIC at 51.4% for the last 12 months which assumes stable development model. Three years ago it was considerably lower at 17.7%. It's average level of ROIC for the last three years was 36.4%.

Tucows Inc showed fast Net Income margin growth of 2.30 pp from 4.30% to 6.60% in 2015. In the last 3 years Net Income margin surged on 2.70 pp from 3.90% in 2012 to 6.60% in 2015.

Tucows Inc operates at ROE of 36.7%. For the last three years the average ROE was 24.2%.

Capital expenditures (CAPEX)

In FY2015 the company had CAPEX/Revenue of 1.72%. Tucows Inc's CAPEX/Revenue surged on 0.847 pp from 0.869% in 2012 to 1.72% in 2015. Average CAPEX/Revenue for the last three years was 1.08%.

Leverage (Debt)

The company has negative net debt at -0.2x Net Debt/EBITDA - at the same time with high growth. In the last 3 years leverage surged on 0.15x from -0.37x in 2012 to -0.21x in 2015.

Peers in Communications

Below we provide Tucows Inc benchmarking against other companies in Communications industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Telehop Communications Inc ($HOP)-11.7%-13.1%-7.8%105.7%
Wi2Wi Corp ($YTY)11.5%100.3%
BSM Technologies Inc ($GPS)39.1%55.5%2.7%
Plaintree Systems Inc ($NPT)14.5%9.1%50.8%-7.1%
Aimia Inc ($AIM)2.9%6.3%-25.6%47.5%
Median (49 companies)9.0%2.5%1.8%1.9%2.7%
Tucows Inc ($TC)18.2%13.3%13.6%17.1%

Top companies by Gross margin, %

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Wanted Technologies Corp ($WAN)86.6%90.5%93.2%94.3%95.6%
CounterPath Corp ($CCV)74.1%80.0%85.1%80.9%81.5%
Mediagrif Interactive Technologies Inc ($MDF)78.2%79.8%79.8%78.8%80.1%
NeuLion Inc ($NLN)45.2%53.6%63.8%70.2%
Sangoma Technologies Corp ($STC)74.5%68.8%66.9%67.2%
Median (40 companies)43.3%43.3%42.7%42.5%49.7%
Tucows Inc ($TC)29.9%27.8%28.5%27.5%30.8%

Top companies by EBITDA margin, %

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Manitoba Telecom Services Inc ($MBT)33.7%34.3%33.7%47.4%42.3%
Cogeco Cable Inc ($CCA)45.8%46.0%44.9%43.8%46.2%
Cogeco Inc ($CGO)28.1%43.2%43.5%43.3%44.3%
Shaw Communications Inc ($SJR.B)43.3%42.7%43.3%42.1%44.6%
BCE Inc ($BCE)37.0%38.8%37.7%38.4%37.7%
Median (49 companies)16.4%15.6%14.8%13.4%17.9%
Tucows Inc ($TC)5.9%6.4%6.6%8.8%11.4%

Top companies by CAPEX/Revenue, %

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Newfoundland Capital Corp Ltd ($NCC.B)8.7%5.5%76.8%
Axia NetMedia Corp ($AXX)10.7%30.8%27.2%27.0%
UrtheCast Corp ($UR)26.5%
TeraGo Inc ($TGO)21.6%20.9%21.5%23.1%
Manitoba Telecom Services Inc ($MBT)16.3%19.8%18.1%22.4%22.9%
Median (52 companies)4.3%2.3%3.3%2.3%2.4%
Tucows Inc ($TC)0.9%0.9%1.0%0.5%1.7%

Top companies by ROIC, %

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Wi2Wi Corp ($YTY)-28.5%-166.9%136.7%
Asian Television Network International Ltd ($SAT)102.7%34.6%23.6%23.4%
Points International Ltd ($PTS)20.7%14.9%15.0%21.2%
NeuLion Inc ($NLN)-62.1%-55.8%-10.3%18.5%
Yellow Pages Ltd/Canada ($Y)8.9%18.0%28.4%17.9%
Median (53 companies)6.3%8.0%8.2%8.0%3.1%
Tucows Inc ($TC)12.8%17.7%22.5%35.4%51.4%

Top companies by Net Debt / EBITDA

 FY2011 FY2012 FY2013 FY2014 FY2015
Top 5
Plaintree Systems Inc ($NPT)0.7x124.2x3.9x
Advantex Marketing International Inc ($ADX)4.8x2.2x5.0x
MDC Partners Inc ($MDZ.A)7.3x12.4x112.6x4.6x
Quebecor Inc ($QBR.B)2.0x3.7x3.9x4.2x
Postmedia Network Canada Corp ($PNC.B)2.9x3.3x3.4x4.2x
Median (41 companies)1.0x1.4x1.3x1.5x1.6x
Tucows Inc ($TC)-1.0x-0.4x-0.7x-0.6x-0.2x