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“Big business feel. Small business price.” It’s a concept that resonates pretty strongly among entrepreneurs who don’t want to lose sales just because they don’t have the infrastructure capabilities of the bigger guys who are willing to spend more on overhead.

After all, the costs of starting a new business are high enough – and only get magnified when you factor in things like the cost of a fax machine or toll free number.

But that was the past. Since the mid 1990s, online services have been popping up to offer entrepreneurs a cheaper communications solution. Today, services like eFax, Onebox, and Phone People offer things like online faxing, virtual phone systems, and toll free vanity numbers at a fraction of the cost of the in-house solutions used by larger companies.

And in the process of helping small businesses grow, one company is taking its business to new heights: j2 Global Communications (NASDAQ:JCOM).

j2 Global Communications operates 16 services that provide online faxing, voice services, and email services to more than 11 million customers. And those don’t just include small businesses anymore… cost-conscious larger businesses are realizing that outsourced communications make a lot of sense in a lot of cases.

JCOM has an impressive track record – the company survived the dot com bubble and ensuing recession only to return a staggering 2,745% to investors who stuck it out with the company between 2001 and now. That’s in large part due to this company’s financial performance.

Communication for Cash

In its latest quarter, ended September 2008, the company reported record profits despite the negative effects of the economy. JCOM’s earnings increased 20% over the prior year to $18.8 million, and the company reaffirmed its guidance for the fourth quarter.

Translation: Expect another highly profitable quarter from this company.

JCOM’s balance sheet is equally attractive. Right now the company has almost $141 million in cash, no debt, and very few looming financial obligations. Based on the company’s current coffers, it could operate for more than a year without taking in a single penny.

Part of the reason that JCOM is in such good financial shape is the company’s ability to parlay its revenues into profits. JCOM’s operating margins have grown by almost 3% in the last year, which suggests that the company is actively working to cut the costs required to bring their products to market. As a whole, JCOM is a lean company – net margins were a whopping 30.5% last quarter – that’s a good thing to see at times when external financing sources are scarce.

A Growing Company

JCOM’s impressive 10.4% revenue growth last quarter was fueled by a combination of acquisitions and organic growth into new markets. In 2008, a couple of the company’s acquisitions included Phone People holdings, a San Diego-based voice service provider, and the digital faxing business of a European communications company. Expansion into new markets, like Onebox and eVoice’s debuts in Mexico, were another catalyst for growth.

Ultimately, j2 Global Communications should be able to perform well in spite of the operating challenges most other companies will be faced with in 2009. And with their next earnings call scheduled for February 19, it won’t be long before we get a glimpse at how the company will be starting off their year.

The Rhino Stock Report took a position in JCOM at $17 in a Rhino Alert sent out to subscribers on January 23. Despite this company’s climb since then, I anticipate a price in approaching $30 in the next 6 to 12 months if JCOM can meet – or beat – analyst expectations.

Disclosure: JCOM is a long position in the Rhino Stock Report’s model portfolio.

Source: j2 Global Communications: Reaching New Heights