j2 Global Communications: Handling your messages

The success of an organization is critically dependent on the efficiency of its communications. There is an outfit in Los Angeles that helps many firms with the messaging end of the game.

j2 Global Communications (NASDAQ: JCOM) provides outsourced messaging and communications services. Clients can retrieve e-mails, faxes, and voice mails from a single phone line that handles unlimited incoming messages and may be used in conference calling. Customers include paid subscribers and advertising-supported free subscribers. The firm's network spans more than 2,800 cities in 40 countries.

Last week, the company pleased investors, when it affirmed its guidance for the second quarter of fiscal 2007 and its outlook for fiscal year 2007. Management sees Q2 EPS of 35-36 cents (35 cent consensus), Q2 revenues of $53.4-$54.8 million ($54.32M consensus), FY07 EPS of $1.35-$1.45 ($1.44 consensus) and FY07 revenues of $217-$229 million ($224.17M consensus). The firm said its consumer price increase appears to be progressing ahead of expectation.

JCOM shares popped into a bullish "flag" consolidation pattern on the news. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the shares with four "strong buys", four "buys", one "hold" and one "sell". Analysts expect a 16% growth rate, through the next year. The JCOM Price to Free Cash Flow ratio (24.30), Sales Growth rate (28.85%), EPS Growth rate (45.83%), Operating Margin (37.02%), Net Profit Margin (29.64%), Return on Assets (20.97%), Return on Investment (23.14%), Return on Equity (24.45%) and Net Income per Employee ($168.41k) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 600 SmallCap Index. Through the past twelve months, it has traded between $22.38 and $34.34. A stop-loss of $29.10 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.