Gamma Communications (AIM:GAMA) - Share price, News & Analysis

Q: What is the Fair Price of GAMA when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

GAMA (£11.66) is trading below our estimate of [[fair value]] (£19.99)

GAMA fundamental analysis
Snowflake Score
Valuation	2/6
Future Growth	3/6
Past Performance	3/6
Financial Health	5/6
Dividends	2/6

GAMA Stock Overview

Gamma Communications plc provides communications and software services for small, medium, and large sized business.

Rewards

Trading at 41.7% below our estimate of its fair value

Earnings are forecast to grow 7.29% per year

Risk Analysis

GAMA passed our risk checks.

Gamma Communications Competitors

Airtel Africa

LSE:AAF

UK£5.2b

TIME dotCom Berhad

KLSE:TIMECOM

RM7.9b

CITIC Telecom International Holdings

SEHK:1883

HK$9.6b

Colombia Telecomunicaciones ESP

BVC:COLTEL

Col$7.1t

Price History & Performance

Summary of all time highs, changes and price drops for Gamma Communications
Historical stock prices
Current Share Price	UK£11.66
52 Week High	UK£23.50
52 Week Low	UK£10.43
Beta	0.91
1 Month Change	-2.83%
3 Month Change	-14.52%
1 Year Change	-40.57%
3 Year Change	5.52%
5 Year Change	85.97%
Change since IPO	468.78%

Recent News & Updates

May 20

Gamma Communications (LON:GAMA) Is Increasing Its Dividend To UK£0.088

Gamma Communications plc ( LON:GAMA ) will increase its dividend on the 23rd of June to UK£0.088. Even though the...

May 04

Gamma Communications (LON:GAMA) Has Announced That It Will Be Increasing Its Dividend To UK£0.088

Gamma Communications plc ( LON:GAMA ) will increase its dividend on the 23rd of June to UK£0.088. Even though the...

Shareholder Returns

	GAMA	GB Telecom	GB Market
7D	8.6%	-1.8%	1.8%
1Y	-40.6%	-12.0%	-7.3%

Return vs Industry: GAMA underperformed the UK Telecom industry which returned -12% over the past year.

Return vs Market: GAMA underperformed the UK Market which returned -7.3% over the past year.

Price Volatility

Is GAMA's price volatile compared to industry and market?
GAMA volatility
GAMA Average Weekly Movement	4.3%
Telecom Industry Average Movement	4.6%
Market Average Movement	5.5%
10% most volatile stocks in GB Market	10.8%
10% least volatile stocks in GB Market	2.8%

Stable Share Price: GAMA is not significantly more volatile than the rest of UK stocks over the past 3 months, typically moving +/- 4% a week.

Volatility Over Time: GAMA's weekly volatility (4%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
2001	1,745	Andrew Taylor	https://www.gammacommunicationsplc.com

Gamma Communications plc provides communications and software services for small, medium, and large sized business. It offers strategic services, such as collaboration, cloud PBX, SIP trunking, and inbound call control services; enabling services, including ethernet, broadband, network, and mobile; and traditional call and line services. The company offers its services through a network of channel partners, as well as directly to end users.

Gamma Communications Fundamentals Summary

How do Gamma Communications's earnings and revenue compare to its market cap?
GAMA fundamental statistics
Market Cap	UK£1.11b
Earnings (TTM)	UK£53.60m
Revenue (TTM)	UK£447.70m

21.1x

P/E Ratio

2.5x

P/S Ratio

Is GAMA overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
GAMA income statement (TTM)
Revenue	UK£447.70m
Cost of Revenue	UK£219.20m
Gross Profit	UK£228.50m
Other Expenses	UK£174.90m
Earnings	UK£53.60m

Last Reported Earnings

Dec 31, 2021

Next Earnings Date

n/a

Earnings per share (EPS)	0.55
Gross Margin	51.04%
Net Profit Margin	11.97%
Debt/Equity Ratio	1.3%

How did GAMA perform over the long term?

See historical performance and comparison

Dividends

1.1%

Current Dividend Yield

24%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is GAMA undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

2/6

Valuation Score 2/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
PEG Ratio

Key Valuation Metric

Which metric is best to use when looking at relative valuation for GAMA?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for GAMA. This is calculated by dividing GAMA's market cap by their current preferred multiple.
What is GAMA's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	UK£1.11b

GAMA key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	2.4x
Enterprise Value/EBITDA	12.5x
PEG Ratio	2.9x

Price to Earnings Ratio vs Peers

How does GAMA's PE Ratio compare to its peers?

GAMA PE Ratio vs Peers

The above table shows the PE ratio for GAMA vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	13.5x
AAF Airtel Africa	10.1x	13.7%	UK£5.2b
TIMECOM TIME dotCom Berhad	20.2x	12.2%	RM7.9b
1883 CITIC Telecom International Holdings	8.9x	5.4%	HK$9.6b
COLTEL Colombia Telecomunicaciones ESP	14.6x	n/a	Col$7.1t
GAMA Gamma Communications	21.1x	7.3%	UK£1.1b

Forward PE

Price-To-Earnings vs Peers: GAMA is expensive based on its Price-To-Earnings Ratio (21.1x) compared to the peer average (13.5x).

Price to Earnings Ratio vs Industry

How does GAMA's PE Ratio compare vs other companies in the European Telecom Industry?

Price-To-Earnings vs Industry: GAMA is expensive based on its Price-To-Earnings Ratio (21.1x) compared to the European Telecom industry average (14.8x)

Price to Earnings Ratio vs Fair Ratio

What is GAMA's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

GAMA PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	21.1x
Fair PE Ratio	18.8x

Price-To-Earnings vs Fair Ratio: GAMA is expensive based on its Price-To-Earnings Ratio (21.1x) compared to the estimated Fair Price-To-Earnings Ratio (18.8x).

Share Price vs Fair Value

What is the Fair Price of GAMA when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: GAMA (£11.66) is trading below our estimate of fair value (£19.99)

Significantly Below Fair Value: GAMA is trading below fair value by more than 20%.

Price to Earnings Growth Ratio

PEG Ratio: GAMA is poor value based on its PEG Ratio (2.9x)

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Future Growth

How is Gamma Communications forecast to perform in the next 1 to 3 years based on estimates from 6 analysts?

Future Growth Score

3/6

Future Growth Score 3/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

7.3%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: GAMA's forecast earnings growth (7.3% per year) is above the savings rate (0.9%).

Earnings vs Market: GAMA's earnings (7.3% per year) are forecast to grow slower than the UK market (11% per year).

High Growth Earnings: GAMA's earnings are forecast to grow, but not significantly.

Revenue vs Market: GAMA's revenue (6% per year) is forecast to grow faster than the UK market (4.1% per year).

High Growth Revenue: GAMA's revenue (6% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: GAMA's Return on Equity is forecast to be high in 3 years time (20.2%)

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Past Performance

How has Gamma Communications performed over the past 5 years?

Past Performance Score

3/6

Past Performance Score 3/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

27.2%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: GAMA has high quality earnings.

Growing Profit Margin: GAMA's current net profit margins (12%) are lower than last year (16.3%).

Past Earnings Growth Analysis

Earnings Trend: GAMA's earnings have grown significantly by 27.2% per year over the past 5 years.

Accelerating Growth: GAMA's has had negative earnings growth over the past year, so it can't be compared to its 5-year average.

Earnings vs Industry: GAMA had negative earnings growth (-16.5%) over the past year, making it difficult to compare to the Telecom industry average (22.4%).

Return on Equity

High ROE: GAMA's Return on Equity (21.2%) is considered high.

Discover strong past performing companies

Financial Health

How is Gamma Communications's financial position?

Financial Health Score

5/6

Financial Health Score 5/6

Short Term Liabilities
Long Term Liabilities
Debt Level
Reducing Debt
Debt Coverage
Interest Coverage

Financial Position Analysis

Short Term Liabilities: GAMA's short term assets (£164.2M) exceed its short term liabilities (£66.2M).

Long Term Liabilities: GAMA's short term assets (£164.2M) exceed its long term liabilities (£41.4M).

Debt to Equity History and Analysis

Debt Level: GAMA has more cash than its total debt.

Reducing Debt: Insufficient data to determine if GAMA's debt to equity ratio has reduced over the past 5 years.

Debt Coverage: GAMA's debt is well covered by operating cash flow (2318.2%).

Interest Coverage: GAMA's interest payments on its debt are well covered by EBIT (113.8x coverage).

Balance Sheet

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Dividend

What is Gamma Communications's current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

1.13%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: GAMA's dividend (1.13%) isn’t notable compared to the bottom 25% of dividend payers in the UK market (1.87%).

High Dividend: GAMA's dividend (1.13%) is low compared to the top 25% of dividend payers in the UK market (5.16%).

Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, GAMA has been paying a dividend for less than 10 years.

Growing Dividend: GAMA's dividend payments have increased, but the company has only paid a dividend for 7 years.

Earnings Payout to Shareholders

Earnings Coverage: With its low payout ratio (23.6%), GAMA's dividend payments are well covered by earnings.

Cash Payout to Shareholders

Cash Flow Coverage: With its low cash payout ratio (21.4%), GAMA's dividend payments are well covered by cash flows.

Discover strong dividend paying companies

Management

How experienced are the management team and are they aligned to shareholders interests?

1.4yrs

Average management tenure

CEO

Andrew Taylor (52 yo)

4.08yrs

Tenure

UK£2,882,000

Compensation

Mr. Andrew George Taylor has been an Independent Non-Executive Director at iomart Group plc since August 1, 2021. He has been a Chief Executive Officer of Gamma Communications plc since May 23, 2018 and ha...

CEO Compensation Analysis

Compensation vs Market: Andrew's total compensation ($USD3.51M) is above average for companies of similar size in the UK market ($USD2.07M).

Compensation vs Earnings: Andrew's compensation has increased by more than 20% whilst company earnings have fallen more than 20% in the past year.

Leadership Team

Experienced Management: GAMA's management team is not considered experienced ( 1.4 years average tenure), which suggests a new team.

Board Members

Experienced Board: GAMA's board of directors are considered experienced (3.7 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: GAMA insiders have bought more shares than they have sold in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/06/28 00:00
End of Day Share Price	2022/06/28 00:00
Earnings	2021/12/31
Annual Earnings	2021/12/31