Stamps.com is a long-term buy at these beaten down prices

Stamps.com is a long-term buy at these beaten down prices

US mailing and shipping solutions company Stamps.com (SMTP) reported stellar earnings in mid February but the shares nevertheless fell a whopping 19%.

Adjusted fourth-quarter earnings per share came in at $4.13, almost double analyst forecasts of $2.62.

Indeed, whichever valuation metric you choose to measure the firm on, it is among the best performers in its industry (software and IT services).

Price to book is 3.61, price to sales on 4.63 and enterprise value to EBITDA at 13.77, ranking it 40th in the industry out of 239.

The share price has dropped from $260 on the day of the earnings release to a low of $181 on 26 February. The bleeding hasn’t stopped. At the time of writing the stock is 4.7% lower, again testing its near-term low.

Markets famously hate uncertainty, so when the company refused to provide forward guidance to accompany the earnings report, it was met with the same response seen by investors elsewhere – sell, sell, sell.

stamps.com price chart
Stamps.com (SMTP) 1-day chart, 4 March 2021. Courtesy TradingView

Although the company did not indicate that it thought revenue might not hold up as the company moves beyond the pandemic, it did say there was “substantial uncertainty in 2021”.

The negative sentiment has for sure collided with wider selling off of tech stocks as investors to some extent rotate into consumer cyclicals.

However, on Tuesday the company announced that it has doubled its share buyback programme to $120 million, having executed the transaction on 26 February – but that hasn’t helped to lift the mood either.

Stamp.com’s exploding revenues

Let’s dig a bit deeper into those earnings results.

Stamps.com revenue jumped $758 million on a year-end view, for a 33% improvement. Certainly, the growth comps were slightly down year on year for the third to the fourth quarter (42% versus 28%).

If we look at the 4Q GAAP eps figure it was even better than the adjusted figure, up 108% year on year ($2.36).

The customer count rose by 25% to 1.02 million on a year on year basis in Q4 too.

This is not a growth company with lots of customers but no profits – quite the reverse.

Now let’s examine the business itself. The company has a clutch of brands that it operates through: Stamps.com, Endicia, ShipStation, ShipWorks and ShippingEasy.

Admittedly much of its operations are currently confined to the US but this should be seen as a positive given the opportunities for international expansion this opens up.

Clearly there are market participants who have determined that the e-commerce leap forward is well covered by the price, with little more to be had. Indeed, they would appear to be selling on the basis that the performance of 2020 will not be repeated in 2021, even if the company does hang on to all the new customers that it has captured.

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Low cost of expansion

Stamps.com caters mostly to small and medium-sized businesses and its offering is cheap, convenient and flexible. In the same way that a few years ago some sneered at Shopify’s turnkey solutions, it would be a mistake to underestimate the stickiness of its products.

Take Shipstation for example. It comes as a WordPress plugin which makes it readily accessible to literally millions of small businesses. Around half of the sites on the internet are built on the WordPress platform.

The service makes it a breeze to organise and manage inventory and shipping, where businesses can hook up with a variety of shippers, from Hermes to Royal Mail or in the case of the US, the US Postal Service (USPS).

The Stamps.com and Endicia brands, is USPS-only solutions for the mailing and shipping of packages. As with Shipstation and users are able to print electronic postage directly onto envelopes, labels or plain paper with a standard PC and printer.

Therefore the marginal cost of acquiring new customers is therefore very low for Stamps.com.

Balance sheet strength

Stamps.com has a Piotroski F score of 7 out of 9, indicating that is has an extremely healthy balance sheet, with no debt and $433 million of cash on hand.

From a quality perspective return on equity is impressive at 21.8% and its P/E for 2020 was 20 and the estimate for this year is 24.2, making it reasonably priced.

On valuation and quality alone the multiples are all flashing buy stock signals.

This stock is a screaming turnaround stock that currently presents an excellent entry point. However, current volatility on the Nasdaq means investors interested in gaining exposure may want to pound cost average in.

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Valuable Tips for the Forex Rookie Traders

Valuable Tips for the Forex Rookie Traders

Fresher deals with different types of complications as he or she is not properly familiar with the market. When the traders will not understand the market properly, they will not able to take the right action depending on the situation. So, as a fresher, you need some suggestions from the professionals so that you can regulate your business properly. In the Forex market, the person needs to manage the risk properly by taking an appropriate decision. There are some important tips for the new investors which are being discussed here.

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Tritax Big Box Reit and Segro are warehouse e-commerce winners

Tritax Big Box Reit and Segro are warehouse e-commerce winners

We have two stock tips for the week ahead, both in the booming warehouse real estate segment.

Top of our list is Tritax Big Box REIT (BBOX), which has risen 5% today, followed by Segro (SGRO), the UK’s largest owner of warehouses with a substantial portfolio in continental Europe also.

Why warehouses? Well, among the biggest winners from the pandemic have been the e-commerce platforms that depend on warehouses and last-mile delivery services.

The market is taking notice. BBOX has jumped 5% this morning to 185p, and the bulls will likely have further to run over the coming months as the shift to online firms.

Last Thursday (14 January) it provided the market with a valuation update on its portfolio of logistics real estate assets.

The company says constrained supply and occupier demand for large premises, combined with what it describes as “a buoyant investment market” is increasing valuation for its prime assets.

As at 31 December the like-for-like increase in valuation rose 8% in the second half from 30 June.

It expects its European Public Real Estate Association net tangible assets (an industry metric that crystallises deferred tax liability on the assumption that REIT entities are buying and selling assets) to beat current analyst estimates, ranging from 152p to 166p by nine sell-side analysts, for an average of 159p.

BBOX focuses on ‘Big Box’ logistics assets greater than 500,000 square feet on long-term leases, which can be around 12 years. Rent’s can be reviewed, but on an upward-only basis, making its portfolio doubly attractive for investors.

PE multiple indicates BBOX is a good company at a bargain price

The stock is trading on a PE multiple of just 17 but its trailing twelve month (TTM) EPS growth is 25%.

For investors looking for the opportunity to secure some capital growth plus income, this could be a safe yet profitable place to park your cash in a balanced portfolio. Dividend growth was expected at 8% in 2020 and 6% for 2021 (ex date 22 October, paid on 13 November), on a current TTM of 5.58p per share.

This is a high-quality stock, with an operating margin of 141%, placing it ninth out of 57 companies in the residential and commercial REIT sub-sector, with a return on equity of 6.9%.

According to Nick Preston at Tritax, manager’s of the trust, “virtually every investor” was eyeing the sector. “Far-eastern investors, European institutions [and] private equity players wanting exposure to the sector,” Preston adds.

Investors should be aware that chairman of the board Sir Richard Jewson is retiring at the company’s next AGM in May 2021. Jewson led the company through its IPO in 2012.

Also, in December Aberdeen Standard Investments acquired a 60% interest in manager Tritax, but the Big Box team is “retaining autonomy and control over investment decisions”, said Sir Richard at the time.

The company’s portfolio continues to grow, with its most recent major acquisition taking place in November 2020, with the purchase of a prime temperature-controlled distribution unit on the south coast of England in a “core” location.

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Segro price momentum set for pick up

Investors who prefer not to buy into a stock that has seen a significant one-day appreciation and has already beaten its analyst consensus price target (176p), might prefer Segro, which also concentrates its portfolio around warehouses. It reported last week that it has collected 98% of rent in fiscal year 2020, ended 31 December.

In the first quarter it received 88% of the £63 million that was payable in advance by tenants. That was a higher collection level than seen in the corresponding time in each of the three previous quarters.

Segro’s share price is up just 0.23% today to 963p. It also has an impressive operating margin, that is in fact higher than BBOX, coming in at 187%, placing it third in the commercial real estate sector.

EPS growth has been declining though since 2018, but it is forecast to pick up this year with a 10% increase.

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Segro is a contrarian pick in that its price momentum has been poor of late, so taking a position depends on an assumption that the market starts to take notice of its valuable position in the e-commerce space in the Uk and across Europe.

It owns logistics warehousing properties in the valuable Greater London and Thames Valley regions and major footprints also in Germany, France and Poland. Segro owns other warehousing and light industrial units – in Spain, the Netherlands and the Czech Republic.

The company’s properties are used by a broad spectrum of clients in sectors including retail, parcel delivery, transport, technology, services and utilities. Interestingly, it’s warehouses include a number that are used as data centres, bringing another layer of diversification to its portfolio.

The analyst consensus price target is 1006p, a 4.34% premium on the current price.

 

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  • Award-winning Cryptocurrency trading platform
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Highly volatile unregulated investment products. No EU investor protection.

  • Over 100 different financial products
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  • Trade top Cryptos such as Bitcoin, Litecoin and Ethereum plus more
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  • Award-winning Cryptocurrency trading platform
  • $100 minimum deposit,
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Author : Gary McFarlane

Gary McFarlane

The author is the financial editor at Finixio, the publisher of buyshares.co.uk, stockapps.com, learnbonds.com and insidebitcoins.com. Gary was the cryptocurrency analyst at the UK's second-largest investment platform, interactive investor, from 2017 to August 2020. Gary is the winner of the Best Cryptocurrency Writer 2018 ADVFN International Awards