Crexendo (CXDO) — our latest company of the month — provides cloud communication platform and services, video collaboration and managed IT services for businesses, notes Faris Sleem, editor of The Bowser Report, a leading advisory service focused on low-priced stocks.
The stock has gained popularity over the past 11 months due to its ability to leverage its AI-powered cloud communications platform and recent partnership with Oracle Cloud Infrastructure.
Crexendo has achieved significant revenue and net income growth since 2020. New software subscribers and expanded partnerships are the key drivers for top line growth. The company has a track record of growing both organically and via acquisitions.
Revenue and gross profit are both in strong upward trends, with trailing twelve month (TTM) revenue totaling $57 million. The company just became profitable within the past year and has TTM net income of $2.7 million. CXDO has tripled the returns from the S&P 500 in the last five years.
During that time, revenue and gross profit increased 247% and 216%, respectively. Its business model relies on recurring revenue and high profit margins to generate growth.
Crexendo has a fantastic balance sheet with assets outweighing liabilities 5.2-to-1. Total debt of $1.6 million is low for an expanding company, and interest expense has decreased for the last four years. Its debt/equity ratio of just 3% is extremely low for the industry.
The company has cash of $13.6 million and operating cash flow of $6.6 million. Its positive cash flows and high current ratio of 2.1 indicate minimal liquidity risk.
Industry outlook is bullish as cloud communication platform and services demand remain elevated. Industry leaders are utilizing AI to improve operating efficiency and long-term profitability. CXDO has also optimized its offerings by utilizing AI, including the addition of an AI assistant to build applications and generate custom scripts.
Overall, CXDO has a competitive advantage in a growing market. Its B2B recurring revenue business model, proprietary technology and strong underlying fundamentals make CXDO poised for future growth.
The shares are up 135% over the past year, making it vital to wait for a desirable entry point. Our long-term price target for CXDO is $9 per share, making the ideal buying range of $3.80-$4.50 per share.
