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What Makes Cogent (CCOI) a Promising Investment Option Now

Zacks Equity Research
·3 mins read

Earnings estimates for the current fiscal for Cogent Communications Holdings, Inc. CCOI have moved up 8.3% in the past 90 days, implying robust inherent growth potential. With healthy fundamentals, this Zacks Rank #2 (Buy) stock appears to be a solid investment option at the moment. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Growth Drivers

Based in Washington, DC, Cogent is a Tier 1 Internet Service Provider (ISP) that offers low-cost, high-speed Internet access, private network services and colocation center services with ultra low latency data transmission. Being the leading provider of high-speed Internet, Cogent benefits from cost-effective operations. The company offers a streamlined set of products, which help in eliminating redundant costs for greater pricing flexibility. Its seamless network delivers high throughput, which reduces the frequency of data packets dropped during transmission compared with traditional circuit-switched networks, thereby creating a more reliable and robust network infrastructure.

Operating as one of the most interconnected Tier 1 networks in the world, Cogent provides efficient on-network and off-network connectivity solutions to various Enterprise segments, including financial companies, educational institutions and law firms at affordable costs. The company offers state-of-the-art colocation data center services that provide incessant power supply and backup generators, making it ideal for disaster recovery and data backup. Its data centers are popularly known for providing a conducive environment for coherent connectivity, security, availability and performance to its end customers. Such attributes are deemed to be extremely beneficial in this hour of crisis, when the bulk of the population is depending on seamless household data connectivity as the coronavirus pandemic continues to lead to worldwide devastation.

In addition, Cogent has a high traffic network footprint across major multi-tenant office buildings in North American cities and carrier-neutral colocation centers in North America and Europe, delivering high levels of Internet traffic. Its pervasive and interconnected network gives a competitive edge over rivals. Moreover, its augmented geographical footprint also accelerates acquisition opportunities, thereby expanding its customer base. This, in turn, offers high-quality, low-churn corporate customers, which ultimately aids in generating positive cash flow with proliferating customer connections.

The stock has a long-term earnings growth expectation of 11.5%. It delivered a positive earnings surprise of 15.9%, on average, in the trailing four quarters, beating estimates thrice and missing once. With a VGM Score of B and a healthy dividend of 3.1%, this stock appears to be an enticing investment option for 2020.

Other Key Picks

Some other similar-ranked stocks in the broader industry are InterDigital, Inc. IDCC, Viasat Inc. VSAT and Ubiquiti Inc. UI.

InterDigital has a long-term earnings growth expectation of 15%. It delivered a positive earnings surprise of 62%, on average, in the trailing four quarters.

Viasat surpassed earnings estimates in the trailing four quarters, the average positive surprise being 402%.

Ubiquiti has a long-term earnings growth expectation of 12.5%. It delivered a positive earnings surprise of 5.7%, on average, in the trailing four quarters.

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