A fast growing and highly mobile business


Tucows Inc (TCX), the second-largest domain registry in the world, has seen its stock rise by 160% over the past year but still has a market cap of only $600 million.  Additionally, given annual EPS growth of 37%, the current PE of 38.6 still looks pretty reasonable.

Domain services remains Tucows’ largest segment but the company also benefits from a fast growing and highly profitable mobile business which now accounts for about $70 million or 40% of revenues.  With a high level of customer satisfaction, gross margins of 50% and mobile subscribers increasing by 60% from 94,000 in 2014 to 151,000 in 2016, mobile seems to be a highly profitable segment with the potential for plenty of future growth.  Furthermore the company has announced plans to roll out fiber to the home services which offers a huge opportunity to add another $50 or $60 million to revenues also at healthy margins of 35% to 45%.

The stock is up significantly this year but given the numerous growth drivers it still looks cheap.

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Disclosure: The author holds no positions in any of the stocks mentioned nor has any intentions to initiate any in the next 72 hours.