Whereas the TSX index is buying and selling close to all-time highs, a number of small-cap shares have underperformed the broader markets within the final three years. One such TSX tech inventory is Tucows (TSX:TC), which is down 77% from its document excessive.
Valued at a market cap of US$215 million, Tucows supplies web providers throughout three segments:
- Ting delivers fibre and wi-fi web.
- Wavelo affords billing, community administration, and developer platforms for communication suppliers.
- Tucows Domains provides wholesale and retail area registration by means of OpenSRS, eNom, Ascio, EPAG, and Hover manufacturers, plus e-mail internet hosting, safety providers, and publishing instruments to web service suppliers and hosting firms.
Let’s see why I’m bullish on this TSX tech inventory proper now.
Is that this small-cap TSX inventory a great purchase?
Tucows reported consolidated income of US$98.5 million within the second quarter, representing a ten% year-over-year enhance. Furthermore, it was the fourth consecutive quarter of double-digit top-line enlargement for the diversified web providers firm.
Within the June quarter, Tucows reported an adjusted EBITDA (earnings earlier than curiosity, taxes, depreciation, and amortization) of US$12.6 million, representing a 37% year-over-year enhance. Within the first six months of 2025, it reported an adjusted EBITDA of US$26.2 million and is on monitor to finish the 12 months with an EBITDA of US$47 million.
The Domains enterprise continues to ship regular development, with income rising 8% to US$67.6 million, whereas adjusted EBITDA elevated 12% to US$12.5 million. Gross margin expanded 14% pushed by wholesome wholesale demand, robust value-added providers efficiency, and regular retail development.
The corporate landed two transformative registry providers contracts that place Tucows as an infrastructure supplier for a few of the world’s largest registries. Administration additionally accomplished the migration of NIXI’s 4 million domains in Might and signed Radix emigrate simply over 10 million domains throughout 11 top-level domains, together with .on-line, .retailer and .tech, beginning in November.
The Radix deal makes Tucows the backend supplier for 2 of the biggest registries globally. Wavelo recorded its finest quarter since inception with income reaching US$12.7 million, up 21% 12 months over 12 months, whereas adjusted EBITDA surged 37% to US$5.4 million. Progress originated from current buyer subscriber enlargement and the introduction of the brand new EchoStar price card as a part of a four-year renewal.
Administration is focusing gross sales efforts on bigger tier-one and tier-two alternatives, whereas deprioritizing smaller offers the place pricing strain is dominant. The corporate is leveraging AI instruments aggressively, with over 40% of code now written by AI among the many most engaged engineers.
Ting delivered 12% income development to US$16.4 million, pushed by an 8% enhance in subscribers to 52,100 whole clients and improved common income per consumer.
The fibre ISP (Web service supplier) enterprise reported an adjusted EBITDA lack of US$600,000 earlier than a non-cash lease adjustment, representing a major enchancment from a US$6.4 million loss within the prior 12 months interval.
Administration offered nonstrategic property totalling over US$15 million throughout three transactions in Arizona and Colorado, accelerating the transformation to a pure-play ISP mannequin.
Company web debt declined for the fifth straight quarter to US$190.3 million, with web leverage at 3.14 instances and curiosity protection at 3.99 instances.
What’s the TSX inventory worth goal?
Analysts monitoring the TSX inventory forecast gross sales to rise from US$368 million in 2024 to US$545 million in 2027. On this interval, its free money stream (FCF) is forecast to broaden from US$19.50 million to US$45.6 million. If the Canadian inventory is priced at 10 instances ahead FCF, it ought to greater than double over the subsequent 18 months.
Whereas Tucows has underperformed its tech friends within the final 4 years, it’s well-positioned to ship outsized returns to traders within the subsequent 12-18 months.
