Constant Contact Climbs Convincingly

Apr. 5.11 | About: Constant Contact, (CTCT)

By Timothy Lutts

As to the market, all is well. Trends are up and breadth is good. So today I want to discuss a new stock that looks like a great investment.

It’s Constant Contact (NASDAQ:CTCT), a company that helps more than 415,000 small businesses, associations and nonprofits connect with their customers.

The medium is email. The tools include customizable templates to aid in email creation, tools to import and manage contact lists, and email tracking and reporting tools to analyze overall campaign effectiveness.

Constant Contact helps companies avoid being treated as spam, helps them avoid ISP volume limits, and generally helps them understand what happens to their email after it’s sent.

And the results have been terrific. Constant Contact has grown in every year of the past decade, and in the Great Recession, it didn’t even blink, growing 73% in 2008 and 48% in 2009. Last year it grew 35%, posting revenues of $174 million.

And the bottom line has begun to fatten up nicely, with profit margins hitting a record 11.2% in the thirds quarter of last year and then 9.3% in the fourth quarter.

This year, the company has added new features that integrate with Facebook and Twitter, promising that the company will maintain its leadership in the age of social networking. Looking forward, analysts are projecting that earnings will grow 68% in 2011 and 39% in 2012, but I find those analysts are typically conservative.

And most important to me is that the stock is hitting new highs. Constant Contact was first recommend by Michael Cintolo, editor of Cabot Top Ten Report, back on December 13, when it was trading at 31. Mike recommended buying between 27 and 29, and his subscribers had many chances to do that, as the stock built a textbook base over the next three months.

Patient investors have been rewarded, as the stock broke out — on big volume — two weeks ago and blasted ahead to new highs. Notable (at least to me) was the fact that there was no news to account for the strong performance. That tells me there’s something good that most investors don’t know about yet, and I like that.

So you could just step in and buy it here, or you could be patient and wait for a better buying opportunity, perhaps a pullback of a few points away from resistance at 35.