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Last Seen: 16 Nov '19
Posted on 22 January 2017, 8:54 PM

The Next Big Thing: Telit Communications and Internet of Things Stocks

Other Insights on Related Shares: TCM.L
Related Shares: Telit Share Price

It is the time when we reflect on what lies ahead, and on what are the trends which are shaping the economy of the year which just begun. Technological innovation as always is one of the main driving factors of change in the business world. The Internet of Things (IoT) is the next big trend which is set to hit the economy in 2017. From self-driving cars to homes equipped with smart metres to smart clothing, the industry for connected devices is going to permeate the way we will live our lives. The Internet of Things is going to make its big impact, in business and in society, and as with any far-reaching innovations launched in Silicon Valley, there is the potential for substantial profits to be made.


While most IoT companies are American, there is a British-based champion of the ground-breaking technology. Telit Communications (LSE-TCM), registered on the AIM, designs and manufactures IoT modules which enable connections between and with devices. It is the global leader in this sphere, accounting for just under a third of the market for IoT-enabling technology. Founded in 1986 in Israel, the IoT manufacturer and service provider already made a splash last year, when it was revealed that the stock surged by over 500% over less than five years; it now has a market capitalisation of £330m.


Its results have been impressive of late: revenues were up 6.3% from $156.3 to $166.1 million year-on-year in the first half of last year, and forward guidance for the full 2016 results was $370-$390 million, an increase of 11-17%. Adjusted EBITDA the first half of the year was $21.4 million. Predicted to rise to $52-$60 million for the full year, an increase of 15% to 32% on the previous year. Adjusted basic earnings per share increase from $10.0 cents to $24-$30 cents, increasing by 11% to 38% on the previous year. The company even released for the first time in its history an interim dividend, 2.5 cents per share, which is expected to by one third of expected full year dividend, based on 28% of the mid-range adjusted EPS guidance (27 cents).


The graph of its one year stock performance is pretty unequivocal (courtesy of Bloomberg). The stock has a yearly return of 42% and a P/E ratio of 37%. Its 52-week range is 167.75 – 305.50. In 2017, this stock, and more in general IoT-related stocks, could come to rival unicorn stocks in earnings performance.


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