The telecom industry has grown dramatically in recent years. Extensive spending on 5G infrastructure deployment, surging need for high-speed data connectivity, and rising demand for managed services are likely to drive further growth.
Moreover, the telecom sector is anticipated to gain significantly from President Biden's Bipartisan Infrastructure Law, which intends to deliver a historic investment in broadband infrastructure deployment of $65 billion to help secure access to dependable high-speed internet across the country.
Also, the telecom services market is expected to grow at a CAGR of 6.4% by 2029. Investors' interest in telecom stocks is evident from the SPDR S&P Telecom ETF's (XTL) 2.2% gains over the past three months.
Given the backdrop, fundamentally sound telecom stocks Ooma, Inc. (OOMA) and Spok Holdings, Inc. (SPOK), currently trading under $20, might be ideal buys this week.
Ooma, Inc. (OOMA)
OOMA provides communications services and related technologies to businesses and residential customers in the United States and Canada. The company's products include Ooma Business, Ooma Office, Ooma Enterprise, and Ooma AirDial.
In terms of forward EV/Sales, OOMA is currently trading at 1.50x, 18.4% lower than the industry average of 1.84x.
OOMA's trailing-12-month gross profit margin of 66.05% is 25.3% higher than the 50.32% industry average. Its trailing-12-month Asset turnover ratio of 1.81% is 277.8% higher than the 0.48% industry average.
OOMA's total revenue increased 15.3% year-over-year to $56.78 million for the third quarter that ended October 30, 2022. Its subscription and services revenues came in at $51.75 million, up 15.9% year-over-year. Moreover, its gross profit came in at $35.92 million, up 18.8% year-over-year.
Analysts expect OOMA's revenue to increase 12.4% year-over-year to $216.09 million in 2023. Its EPS is estimated to grow 3.9% year-over-year to $0.53 in 2023. It has surpassed EPS estimates in all four trailing quarters. Over the past six months, the stock has gained 22.5% to close the last trading session at $14.21.
OOMA's overall A rating equates to a Strong Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B for Value, Stability, and Sentiment. Within the Telecom - Domestic industry, it is ranked first among 19 stocks. Click here for the additional POWR Ratings for Momentum and Quality for OOMA.
Spok Holdings, Inc. (SPOK)
SPOK operates as a healthcare communication solution provider, serving businesses, professionals, management personnel, medical personnel, field sales personnel and service forces, manufacturing organizations, and government agencies.
In terms of forward EV/Sales, SPOK is currently trading at 1.11x, 39.6% lower than the industry average of 1.84x. Its trailing-12-month Price/Sales of 1.23x is lower than the industry average of 1.24x.
SPOK's trailing-12-month gross profit margin of 66.14% is 31.5% higher than the 50.32% industry average. Its trailing-12-month Asset turnover ratio of 0.55% is 14.5% higher than the 0.48% industry average.
SPOK's operating income came in at $3.54 million for the third quarter that ended September 30, 2022, compared to a loss of $3.56 million in the year-ago period. Its net profit came in at $2.92 million compared to a net loss of $2.49 million for the same period. Also, its EPS came in at $0.15 compared to a loss per share of $0.13 for the previous year.
SPOK's EPS is estimated to grow 64.7% year-over-year to $0.84 in 2023. Over the past six months, the stock has gained 20% to close the last trading session at $8.51.
SPOK's overall A rating equates to a Buy in our POWR Ratings system. It has an A grade for Growth and Sentiment and a B for Quality. The stock is ranked #2 in the same industry. We've also rated SPOK for Stability, Momentum, and Value. Get all SPOK ratings here.
OOMA shares were trading at $13.62 per share on Thursday afternoon, down $0.59 (-4.15%). Year-to-date, OOMA has declined -33.37%, versus a -19.63% rise in the benchmark S&P 500 index during the same period.
About the Author: RashmiKumari
Rashmi is passionate about capital markets, wealth management, and financial regulatory issues, which led her to pursue a career as an investment analyst. With a master's degree in commerce, she aspires to make complex financial matters understandable for individual investors and help them make appropriate investment decisions.
2 Telecom Stock to Buy for Under $20 This Week StockNews.com
