Five analysts have increased their earnings estimates for this internet mailing company in the past 30 days.
Stamps.com Inc. (STMP)
From Validea Hot List Newsletter
Strategy: Contrarian Investor
Based on: David Dreman
Stamps.com Inc. (STMP) is a provider of internet-based mailing and shipping solutions in the United States. The Company offers mailing and shipping products and services to its customers under the Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy brands. It operates through the internet Mailing and Shipping Services segment. Under the Stamps.com and Endicia brands, customers use its United States Postal Service (USPS) only solutions to mail and ship a range of mail pieces and packages through the USPS. USPS mailing and shipping solutions enable users to print electronic postage directly onto envelopes, plain paper, or labels using only a standard personal computer, printer and internet connection. The Company offers USPS mailing and shipping services, multi-carrier shipping services, mailing and shipping services, branded insurance and international postage solutions. The Company offers customized postage under the PhotoStamps and PictureItPostage brand names.
MARKET CAP: PASS: Medium to large-sized companies (the largest 1500 companies) should be chosen, because they are more in the public eye. Furthermore, the investor is exposed to less risk of “accounting gimmickry”, and companies of this size have more staying power. STMP has a market cap of $3,451 million, therefore passing the test.
EARNINGS TREND: PASS: A company should show a rising trend in the reported earnings for the most recent quarters. STMP’s EPS for the past 2 quarters, (from earliest to most recent quarter) 2.49, 2.85 have been increasing, and therefore the company passes this test.
EPS GROWTH RATE IN THE IMMEDIATE PAST AND FUTURE: PASS: This methodology likes to see companies with an EPS growth rate higher than the S&P in the immediate past and a likelihood that this trend will continue in the near future. STMP passes this test as its EPS growth rate over the past 6 months (66.66%) has beaten that of the S&P (-16.08%). STMP’s estimated EPS growth for the current year is (3.03%), which indicates the company is expected to experience positive earnings growth. As a result, STMP passes this test.
This methodology maintains that investors should look for as many healthy financial ratios as possible to ascertain the financial strength of the company. These criteria are detailed below.
CURRENT RATIO: PASS: A prospective company must have a strong Current Ratio (greater than or equal to the average of it’s industry [1.40] or greater than 2). This is one identifier of financially strong companies, according to this methodology. STMP’s current ratio of 2.35 passes the test.
PAYOUT RATIO: PASS: A good indicator that a company has the ability to raise its dividend is a low payout ratio. The payout ratio for STMP is 0.00%. Unfortunately, its historical payout ratio is not available. Nonetheless it passes the payout criterion, as this is a very low payout.
RETURN ON EQUITY: PASS: The company should have a high ROE, as this helps to ensure that there are no structural flaws in the company. This methodology feels that the ROE should be greater than the top one third of ROE from among the top 1500 large cap stocks, which is 17.73%, and would consider anything over 27% to be staggering. The ROE for STMP of 37.59% is high enough to pass this criterion.
PRE-TAX PROFIT MARGINS: PASS: This methodology looks for pre-tax profit margins of at least 8%, and considers anything over 22% to be phenomenal. STMP’s pre-tax profit margin is 34.19%, thus passing this criterion.
LOOK AT THE TOTAL DEBT/EQUITY: PASS: The company must have a low Debt/Equity ratio, which indicates a strong balance sheet. The Debt/Equity ratio should not be greater than 20% or should be less than the average Debt/Equity for its industry of 69.12%. STMP’s Total Debt/Equity of 13.87% is considered acceptable.
John Reese, Validea Hot List Newsletter, www.validea.com, 877-439-0506, March 9, 2018