Pacific Trader: Victoria’s Vecima Networks is a tech sleeper

The broadband technology company just tripled its earnings year-over-year 

The stock: It’s bad enough in Vancouver, but companies based in Victoria tend to be even further off the radar of the vast majority of investors. Yet there’s innovation and shareholder value being created on the Island. Take Vecima Networks (TSX:VCM), a software and hardware developer specializing in broadband communications and entertainment technology.

The drivers: Vecima operates in three segments: video and broadband solutions, content delivery and storage, and telematics for managing vehicle fleets. Its customers are telecom, cable and streaming companies like Vodafone, Rogers and Hulu.

Vecima makes the bold claim to have invented video-on-demand and to have led the industry to Distributed Access Architecture. What we can say for certain is this is no flash-in-the-pan startup. Founded in 1988 in Saskatoon (where many of its 600 employees still work), it is now that rarity in Canadian IT: a mature, profitable company that’s been paying a dividend since 2014.

There’s nothing stodgy about its financial performance, however. In its full-year 2023 results released in September, Vecima reported revenue of $303.4 million, a 64-percent increase over fiscal 2022. Net income for the year tripled to $27 million from $8.7 million a year earlier. So investors can have their profit cake and eat ever more of it too. Yet the stock trades for a pretty modest price-to-earnings multiple of 15, based on its closing price of $17.45 a share on Tuesday, October 17. That’s what you get for running your company from lovely, out-of-the-way Victoria.

Word on the street: Of the three analysts covering Vecima, two give the company a “buy” rating and the third, “strong buy.” The consensus 12-month price target is $26 a share. “By the looks of it, the dividend is well covered and Vecima Networks is reinvesting its profits efficiently as evidenced by its exceptional growth,” a recent Simply Wall Street article stated.

Coming and going: Lithium Americas Corp. (TSX, NYSE:LAC) has spun out its Argentinian brine operations as Lithium Americas (Argentina) Corp., trading under the symbol LAAC. The two halves, both still based in Vancouver, were split due to potential conflicts over Chinese holdings of the company, which is developing the massive Thacker Pass deposit in Nevada. Once developed, Thacker Pass would be the only major source of the critical battery mineral on American soil.