This Canadian tech stock recently acquired a U.S. company that will complement its contributions to the network known as the Internet of Things.
While the stock declined after the deal was completed, this acquisition—and the company’s commitment to high research spending—will add to its expertise and should position it for strong growth in the future.
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SIERRA WIRELESS (Toronto symbol SW; www.sierrawireless.com) makes digital components that connect products, including smart electricity meters and vehicles, to the Internet. This is known as machine-to-machine networking, or, more generally, as the Internet of Things.
In the quarter ended September 30, 2017, Sierra made sales of $173.2 million. That’s up 12.8% from $153.6 million a year earlier (all figures in U.S. dollars).
In the latest quarter, excluding one-time items, the company earned $7.6 million, or $0.23 a share. That’s up 85.4% from $4.1 million, or $0.13 per share, a year earlier. In addition to higher sales, lower costs contributed to the gain.
To remain competitive, Sierra spends a high 12% of its revenue on research (it does not pay a dividend). The company also buys firms with technology and products it can use for its existing business.
In December, the company completed its acquisition of Numerex Corp. (symbol NMRX on Nasdaq), at a cost of $107 million US of its common shares. Due in part to the need to dilute its existing shareholders under the terms of the deal, Sierra’s stock declined in December.
Growth stocks: Sierra also acquires global navigation satellite system
Numerex operates in the same Internet of Things market as Sierra, but it provides a range of products and software specifically tailored to the needs of distinct customer groups. Its services include law-enforcement tracking of non-violent offenders, monitoring and tracking of waste management bins, containers and vehicles, and end-to-end tracking of factory and warehouse operations.
Earlier this year, Sierra paid Taiwan’s GlobalTop Technology $3.2 million for its global navigation satellite system (GNSS) business.
GNSS chips provide location-tracking for navigation and data transfer. These services have expanded thanks to connected cars, wearable devices and drones.
GlobalTop’s GNSS business could help Sierra increase its sales to existing clients in the areas of vehicle tracking and drones. The firm is already a leader in those fields.
Sierra holds cash of $74.2 million, or $2.30 a share, and has low debt.
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