Case Study: Tucows Inc. (TCX)

A quick look at one of The Bowser Report’s most recent winners

[hr]The article was originally published in the July 2015 edition of The Bowser Report.
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Tucows Inc. (TCX) joined The Bowser Report in January 2013 when it was trading for $1.50 a share ($6 adjusted for the 1-for-4 reverse split). Now, the company is trading for just under $30. As a result of this success, we decided to do a case study on Tucows, describing what it did right to be where it is today.

Tucows year-to-date weekly prices; January 2, 2015 to July 02, 2015

OPERATIONS

When we initially recommended Tucows, we described its five operating segments at the time: OpenSRS domain name management, Platypus billing service, Hover retail service, YummyNames domain portfolio service and Butterscotch content service.

Since recommendation, another TCX segment, Ting, took off. The business introduced its Android application in April 2013, began offering Tri-Band LTE service and devices in December 2013, added the iPhone 5 to its list of compatible devices in March 2014, added gigabit fiber Internet access in Charlottesville, VA in December 2014, brought fiber access to Westminster, MD in January 2015 and opened its GSM network beta in March 2015. Access revenues grew from $3,965,684 in fiscal 2012 (right after recommendation) to $35,887,005 in fiscal 2015—growing 805%!

FINANCIALS

Speaking about the company’s financials as a whole, Tucows reported its fiscal 2012 results shortly after recommendation. This filing included $114,726,901 in sales compared to $97,064,967 in 2011. That’s an increase of 18% year-over-year. Despite the increased revenues, fiscal 2012 earnings slid 28%, from $6,170,231 in 2011 to $4,424,142 in 2012. The stock price remained relatively flat compared to the company’s price at recommendation, in spite of the mixed earnings.

Since recommendation, the company’s financials have skyrocketed. In fiscal 2013, revenues climbed to $129,934,904—a 13% increase year-over-year. In fiscal 2014, they rose another 14% year-over-year to $147,667,107. In the first three months of 2015, revenues soared 18%.

Tucows followed its 28% year-over-year slide in earnings during 2012 with a 6% year-over-year slide in 2013—from $4,424,142 to $4,180,464. However, during fiscal 2014, earnings jumped nearly $2.2 million (53%) to $6,374,096.

SHARE STRUCTURE

In December 2013, Tucows executed a 1-for-4 reverse stock split and began trading on the NASDAQ Capital Market, moving from the NYSE MKT. Wall Street appeared to favor this move, as the stock price has grown 103% from when the transition took place (December 30, 2013) to the current price.

SUMMARY

Tucows, like many of our most successful companies, formed a perfect storm of business and financial success. The company operated in a hot segment, online services, but had a unique catalyst that had yet to fully reveal its potential, Ting. Once the catalyst ignited, the company’s financials and  the stock price took off.

Tucows is a perfect case study for The Bowser Report’s objectives. Through fundamental analysis, we attempt to discover stable businesses with strong upside potential. Of course, predicting the future is impossible, but our tried and true method leads to enormous profits if you are patient.

Since recommendation ($6 a share)*, Tucows has soared to a high of $29.73—a maximum gain of 396%. To Tucows, great job. To all of our subscribers who bought this recommendation, congratulations. To all of those who did not, do not worry, there will be more multibaggers† in the future. Just be patient and stick to the Game Plan.

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*$6 a share at recommendation is adjusted for Tucows Inc.’s 1-for-4 reverse split that took effect in December 2013.

†A multibagger is a security that increases more than 100%, with a 2-bagger being 100%, a 3-bagger, 200%, a 4-bagger, 300%, etc.

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The Bowser Report is a monthly financial newsletter that specializes in small stocks trading for $3/share or less. Our goal is to provide the individual investor with relevant information on microcap stocks. Each month, we recommend a new company, provide information on past recommendations and report news surrounding the microcap marketplace.

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Information in this blog post may contain references to past Bowser recommendations. This blog post contains no recommendations, and instead relies on data gathered on past recommendations from sources thought to be reliable.