VocalTec Communications (VOCL): Another Interesting VOIP Investment
Posted on August 28, 2009
After my successful investment in VG, I’ve been looking for other ways to play the renewed interest in VOIP, especially considering the push for VOIP applications on mobile networks.
One stock that peaked my interest was VOCL. The company is a provider of carrier-class voice-over-IP solutions for communication service providers, and counts VG as a customer. VOCL was in fact a pioneer in the VOIP space. Recently, VOCL announced the availability of a new mobile VOIP product, which you can read about here. Supporting my bullish stance on VOIP for mobile was this interesting quote from the CEO in the press release for the new product: “Market estimates mention mobile broadband penetration rates of over 50% by 2013 with cellular VoIP representing the majority of voice traffic by the same year.”
As for the stock, though it has increased over 1,000% from its low (wish I had found it earlier, of course), incredibly it still seems to offer a good risk/reward. Basically, in February of this year, VOCL bought back 1.7 million shares of its own stock from Cisco International at $0.40. That represented about 23% of the shares outstanding, leaving VOCL with about 5.7 million shares outstanding.
At the current price of about $1.75, this equates to a market cap of about $10 million. However, at the end of the last quarter, VOCL reported about $11 million in cash, implying that the company, despite the significant rise in the stock price, still sports a negative enterprise value. Notably, however, during the last quarter revenue grew by 50% on a sequential basis to $1.5 million and the company reduced losses to around $700K. In 2008, VOCL had approximately $6 million in revenue and the company expects growth this year. With over 60% gross margins, this revenue stream, and other IP at the company, are clearly not worthless.
Overall, despite the fact that the company has had significant trouble generating profits in the past, I think that at current prices, these financial difficulties are already priced into the stock valuation, given the negative EV. At the same time, as the company’s financial situation improves due significant industry-wide changes, and as more investors look for ways to invest in the mobile VOIP sector, VOCL’s stock value could still increase significantly.
Disclosure: Affiliates of Envoy Global Research, and its principals, own shares in VOCL and VG. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
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This site may include market analysis and we may own shares in the stocks mentioned in our reports. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
I should point out that VOCL traded at $3 a few years back, giving the company a valuation north of $20 million. With the share buyback, the adjusted price for a similar valuation would be nearly $4.
I bought 25K shares at 22 cents in early february. 2010 rev should be 8 million with 1 million profit with 10 million in cash. Give it 4 times rev or pe of 30 and one could justify 30 million valuation plus cash could be valued as high as 40-50 million or $7-10 per share.
[…] After my successful investment in VG, I’ve been looking for other ways to play the renewed interest in VOIP, especially considering the push for VOIP applications on mobile networks. One stock that peaked my interest was VOCL. …Read More […]
I stumbled on this company a few weeks ago and I purchased when the market was falling in late October 2009. I viewed the technical analysis and the potential of the company and felt very comfortable that this is an undervalued play. I also like that the company is Isreali and belive that will have a greater impact in penetrating emerging markets. What really got my attention was the low number of shares and the increased positive volume compared to the selling volume. VocalTec has great profit margins of 60%’ish which iof they are kept up, can only make this a solid company with a very bright future. However, I was a little surprised that after the 3rd quarter report was issued, the stock dropped $.14/ share. Oh well, I believe the long term potential for VOLG is very good and I wish I had gotten in at $.22/ share. That was a great play; congrats!
[…] Congrats to all who have held VOCL, since our first recommendation last August (find it here). […]