A Top Value Stock for 2020 to Double Your Money

Vecima Networks Inc (TSX:VCM) is positioned well for industry leadership in the Distributed Access Architecture market and the internet protocol video content delivery and storage space.

Increasing yield

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Vecima Networks (TSX:VCM) was founded in 1988 in Saskatoon, Saskatchewan. Today, Vecima has a global presence with offices in Vancouver, Atlanta, Tokyo, Amsterdam, London, and a manufacturing facility in Saskatoon. Vecima’s corporate head office is located in Victoria, British Columbia.

The company has a price-to-book ratio of 1.26 and market capitalization of $227 million. Debt is very sparingly used at Vecima, as evidenced by a debt-to-equity ratio of just 0.01. The company has average performance metrics with a return on equity of 1.87%.

Vecima is a global leader focused on developing integrated hardware and scalable software solutions for broadband access, content delivery, and telematics. The company enables the world’s leading innovators to advance, connect, entertain, and analyze. Vecima builds technologies that transform content delivery and storage, enable high-capacity broadband network access, and streamline data analytics.

Vecima’s business is organized into three segments: Video and Broadband Solutions (VBS), Content Delivery and Storage (CDS), and Telematics.

VBS includes platforms and modules that process data from the cable network and deliver it in formats suitable to be consumed on televisions and internet devices. Terrace and TerraceQAM are two key product families in this segment, which meet the needs of the Entra product family.

CDS includes solutions and software, under the MediaScaleX and ContentAgent brands, for industries and customers that focus on ingesting, producing, storing, delivering, and streaming video content for live linear, Video On Demand, network Digital Video Recorder, and time-shifted TV services.

Telematics provides fleet managers with the key information and analytics they require to optimally manage their mobile and fixed assets under the Contigo, Nero Global Tracking, and FleetLynx brands.

The company generated revenue of $20.1 million and ended the recent quarter in a strong financial position with $41.3 million in cash. Vecima achieved gross profit of $10.5 million and a gross profit margin of 52%, as compared to gross profit of $10.2 million and a gross profit margin of 49% last year. Vecima declared a dividend of $0.055 per share, which represents $26 million returned to shareholders through regular dividends.

The North American cable industry continues to prepare for the transition to a new architecture: Distributed
Access Architecture (DAA). Vecima’s Entra family of DAA products has been moving successfully through lab trials.

The company anticipates initial sales of remote nodes and remote monitor products to commence in 2020. While initial sales are expected to be modest, momentum is expected to build, as additional customers move closer to deployment. Demand for legacy cable products is expected to continue to taper through 2020 as the industry evolves to the new technologies.

Overall, Vecima is extremely cheap and positioned well for industry leadership in the DAA market and the internet protocol video content delivery and storage space. With a strong balance sheet and very low leverage, the company is well positioned to pursue product strategies while also continuing to assess attractive acquisitions that provide significant accretion and provide rapid access to technologies and differentiating features that help drive growth and success.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.

More on Investing

money cash dividends
Dividend Stocks

2 Passive-Income ETFs to Buy in 2022

Unlike stocks, distribution-focused ETFs may not offer an equally healthy capital-appreciation potential, but they might still be worth buying.

Read more »

Businessperson's Hand Putting Coin In Piggybank
Dividend Stocks

RRSP Investors: 2 Top Total-Return Stocks to Build Retirement Wealth

These top TSX dividend stocks offer high yields and currently trade at discounted prices.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

The 3 Best TSX Dividend Stocks That Pay Cash Monthly

Looking to earn monthly passive income from top dividend stocks? Here are three fresh ideas for July 2022.

Read more »

Cogs turning against each other
Dividend Stocks

2 Resilient Value Stocks That Could Weather the Storm

The resilient businesses of two value stocks can help you endure recessionary pressures and deliver superior returns in 2022.

Read more »

exchange traded funds

3 Must-Buy Bank of Montreal ETFs to Ride Out a Recession

Passive investors may wish to buy BMO Covered Call Canadian Banks ETF (TSX:ZWB) and two other incredible ETFs that right…

Read more »

Senior Man Sitting On Sofa At Home With Pet Labrador Dog
Dividend Stocks

Retirees: Fortify Your Portfolio by Building a 2nd Pension

One of the best ways to utilize your retirement savings without depleting them is to invest them in dividend stocks.…

Read more »

Man holding magnifying glass over a document
Stocks for Beginners

The Valuation Conundrum: P/E Ratio vs. P/S Ratio

Did you buy a stock with low P/S ratio and make a loss? Most investors fall prey to the valuation…

Read more »

growing plant shoots on stacked coins
Energy Stocks

Buy the Dip? 2 TSX Energy Stocks With Fast-Growing Dividends

TSX energy stocks have seen a double-digit decline in June. Here are two stocks with incredibly fast-growing dividends to consider…

Read more »