If you’ve ever experienced the terror of spilling a glass of water on your laptop, you’ll appreciate the benefit of Carbonite’s backup data service. This leading provider of cloud-based data backup continuously saves and stores files remotely, in case your hardware is damaged. The company went public in August 2011 and has been saving millions of precious files since it started selling this service in 2005.

But now, with a major acquisition, Carbonite (NSDQ: CARB) has entered a faster-growing market with promises of much-higher profitability. I’m expecting a 30%-plus gain in the stock this year as fear of hacks and increased demand from small businesses drive earnings up.

EVault’s Game Changer

That acquisition, in January 2016 of EVault, doubled the size of the market for Carbonite’s products. EVault serves small to midsize businesses (SMBs), and demand from them is growing at twice the rate of larger business customers and significantly faster than demand from consumers.

While losing your personal photos and documents may be upsetting, a small business can shut down if it loses critical files. A hardware malfunction or an insidious malware infection can paralyze a small operation. Carbonite’s software continually saves users’ files throughout the day to its own servers or to company-owned hardware, where it sits safely until the problem is fixed.

Based on personal experience, I can tell you how easy it is to recover your files. Once the hardware is repaired or a new computer purchased, a simple log-on starts the recovery process. All files are quickly restored and organized exactly as they had been pre-disaster. SMBs love the simplicity, which doesn’t require a dedicated IT person.

Carbonite’s acquisition of EVault provides it with the expertise to handle the more-complex storage needs of business customers. EVault adds the capabilities of VMware virtualization, which handles many operating systems and allows customers to continue to operate via the cloud even before they have restored all files on site.

Small and midsized businesses are shifting file storage from on-premise hardware to cloud-based, third-party data companies. International Data Corp., a well-respected expert on tech spending, estimates that the data protection and recovery software market will grow from $6.3 billion in 2015 to $8.2 billion in 2019.

Carbonite’s early consumer customers are sticking with the product, but growth for this customer set is slowing. In 2015, consumer revenue grew just 2% as SMB revenue jumped 35%. The purchase of EVault gives the company more exposure to this faster-growing market.

Profits Improving

Although the acquired EVault business has lower profit margins, management promised—and has delivered—profitability improvements. The sharing of back-office resources and more efficient use of data centers due to increased automation at EVault is driving profitability. After dropping to 68% right after the purchase of EVault, product profit margins have increased over the last six months. Management expects them to reach the high 70% range in the next two years.

Best of all, Carbonite’s ­subscription-based model locks in future growth. Retention rates are at high 90% levels. In 2016 Carbonite shared PC Magazine’s top-rated Business Choice Award for small-business cloud computing with DropBox.

A base of recurring revenue tends to generate rich cash flows. After a one-quarter drop because of the timing of the EVault acquisition, cash flow from operations rose 77% the past six months.

If fourth-quarter earnings come in as expected in early February, Carbonite will have more than tripled earnings in 2016. Although the bulk of this burst is from the EVault purchase, the base business is growing as well. Earnings should grow 17% this year, as the company invests more heavily to grow its business, and are expected to ramp up to 30% in 2018.

My $23 target is based on a price-to-earnings ratio of 27 on 2018 estimates.