Why Stamps.com Inc.'s Shares Skyrocketed Thursday

By Alex PlanesFool.com

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Stamps.com leapt as much as 23% higher today after the postage purveyor reported record financial results for its fiscal fourth quarter on Wednesday evening. As of 1:30 p.m. the stock was up about 18% from the previous day's close.

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So what: Stamps.com's fourth-quarter revenue climbed 29% year over year to reach a company-record $41.9 million. Adjusted earnings also hit a record level of $0.72 per share. Both top and bottom lines easily beat the targets set by Wall Street, which had been for just $32.4 million in revenue and $0.65 in EPS. For the full year, Stamps.com reported $147.3 million in revenue (up 15% year over year) and $2.47 in adjusted EPS (up just 4% year over year).

Looking ahead, Stamps.com is now offering guidance ranges of $160 million to $180 million in revenue for its 2015 fiscal year, which should produce adjusted EPS in the range of $2.50 to $2.90. Both top- and bottom-line guidance ranges compare favorably to Wall Street's targets of $160.7 million in revenue and $2.67 in EPS for the year.

Now what: The midpoint of Stamps.com's EPS guidance grants it a forward P/E of about 20.8, based on today's share prices. Growth from today's full-year EPS to 2015's midpoint of $2.70 in EPS would equate to growth of roughly 9%, which is stronger than what Stamps.com managed this past year, but perhaps not worth getting excited over when you realize that the company's shares have derived almost all of their gains this year from a rising valuation. Stamps.com's P/E ratio has moved in waves over the past several years, and today's pop has pushed it back to levels near an earlier plateau reached in 2013. Stamps.com's EPS once grew at a rapid clip, but it appears that the company may be reaching the limits of its current earnings growth cycle. I'd tread cautiously for the time being.

The article Why Stamps.com Inc.'s Shares Skyrocketed Thursday originally appeared on Fool.com.

Alex Planes has no position in any stocks mentioned. The Motley Fool recommends Stamps.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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