The ongoing market volatility has dragged valuations of several TSX stocks lower in 2025, making them attractive to value investors. In this article, I have identified one such Canadian tech stock in Vecima Networks (TSX:VCM), which currently trades 57% below all-time highs. Let’s dive deeper.
Should you own this TSX stock right now?
Valued at a market capitalization of $243 million, Vecima Networks develops hardware and software solutions for broadband access, content delivery, and telematics. It operates through three segments:
- Video and Broadband Solutions: The segment processes data from the cable network and delivers internet connectivity to homes over cable and fibre.
- Content Delivery and Storage: The segment offers solutions and software for service providers and content owners that focus on producing, storing, delivering, and streaming video for live linear, video-on-demand, network digital video recorder, and time-shifted services over the internet.
- Telematics: The segment provides information and analytics to help fleet managers manage both mobile and fixed assets.
Vecima Networks has increased its sales from $71.5 million in fiscal 2017 (ended in June) to $291 million in fiscal 2024, indicating an average annual growth rate of over 22%.
Vecima reported mixed results in fiscal Q2 with revenues of $71.2 million, up 15% year-over-year but down 13% sequentially. Despite the increase in consolidated sales, Vecima faced temporary headwinds that impacted profitability, resulting in an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of $1.1 million and a net loss of $7.9 million.
CEO Sumit Kumar characterized Q2 as “complex,” citing multiple overlapping challenges. It includes a shift in product mix toward the company’s new EN9000 platform, which carries a lower margin profile as a standalone product.
Higher margins ahead
While strategically important, this modular node platform is designed to be populated with higher-margin software-driven modules over time. Additionally, customer timing adjustments for network upgrades slowed Entra products’ sales pace as Tier 1 operators worked through system-level field qualifications.
Vecima also recorded $4.3 million in non-cash foreign exchange losses and implemented a workforce reduction of 12%, resulting in $2.8 million in restructuring costs. Management expects this restructuring to yield annualized cost savings of about $17.5 million.
Despite near-term challenges, Vecima highlighted several strategic achievements during the quarter. It completed the acquisition of Falcon V Systems, which brought crucial new software technologies, including Principal Core for platform orchestration and Test Suite for accelerating DAA software upgrades.
What next for this TSX tech stock?
Looking ahead, management acknowledged that continued demand volatility may persist into the second half due to customer project timing and uncertainty around potential U.S. tariffs on Canadian goods.
While cautious about near-term forecasting, Kumar expressed confidence in Vecima’s long-term prospects, citing the company’s strong market position (approximately 40% global share in Remote PHY devices and over 80% in remote MACPHY) and deep relationships with major operators.
Bay Street expects Vecima to grow its sales to $358 million in 2026. Moreover, adjusted earnings are forecast to expand from $0.89 per share in 2024 to $1.19 per share in 2026. If the TSX stock is priced at 15 times forward earnings, it will trade around $18 per share over the next 12 months, indicating an upside potential of more than 75% from its current levels.
Analysts also expect Vecima to report free cash flow of $33 million in 2025. Today, Vecima pays shareholders an annual dividend of $0.22 per share, indicating an annual dividend expense of $5.4 million and a payout ratio of less than 20%.
