TIO Networks is still undervalued, says PI’s Sangha

It is unlikely TIO Networks (TIO Networks Stock Quote, Chart, News: TSX:TNC) will be able to continue to post 100% year-over-year revenue growth, but the stock remains undervalued, says PI analyst Pardeep Sangha.

Yesterday, TIO reported its Q4 and fiscal 2014 results. In the fourth quarter, the company earned $20,655 on revenue of $19.69-million, a topline that was up 100% over the same period a year prior.

“We had a truly superb quarter and year driven by significant organic and inorganic growth,” said CEO Hamed Shahbazi. “Fiscal 2014 was a year marked by the successful execution of large-scale and meaningful initiatives that have positioned Tio for further growth. Going forward, we are confident about our growth prospects in fiscal 2015, which will include a full years contribution of both Globex and ChargeSmart revenue — we have never been stronger. We continue to focus on opportunistic acquisition and growth opportunities.”

Sangha notes that TIO’s revenue growth was driven by the company’s Globex acquisition and the acquisition of Leap Wireless (Cricket) by AT&T. He expects that the company’s revenue will decline from Q4 to Q1 because of a change in revenue recognition for Cricket customers migrating onto the AT&T GSM network, but says this decline will be partially offset by growth in the overall number of AT&T locations.

The analyst expects TIO’s revenue will grow to $72-million in fiscal 2015 and then to $75-million the following year. He thinks the company’s gross margins will increase to 33% in 2015 and to 39% in 2016.

In a research update to clients this morning, Sangha maintained his BUY recommendation and one-year target price of $1.50 on TIO Networks.

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