Perhaps lost in the massive rally today was some very positive guidance issued by magicJack (CALL). This fast-growing telecom carrier showed why its stock has more than doubled in the past year. Given its torrid revenue and earnings growth, the stock is still cheap and should be seriously be considered by growth investors as valuations are still compelling.
Here are some highlights from company's announcement:
- The company provided revenue guidance of $40 million to $41 million, above the consensus estimate of $39 million.
- Quarterly earnings should come in within a range of 55 to 80 cents a share, a huge increase from Q3 2011's EPS of 35 cents.
- magicJack raised its full-year guidance for earnings by 20 cents a share. The company now expects to earn between $1.70 and $2.00 a share in 2012.
- It also boosted its revenue guidance for 2012, from a range of 25% to 40% to a higher range of between 35% and 45%.
According to the business description from Yahoo Finance, "magicJack VocalTec Ltd. provides voice-over-Internet protocol services over various platforms. It also offers magicJack, a competitive local exchange carrier."
Here are four reasons why magicJack still has further gains from $26 a share:
- Earnings are quickly going in the right direction. The company lost 8 cents a share in FY 2011 (it did have over $20 million in positive operating cash flow, though) but is on pace to post over $1.70 a share (see guidance) in FY 2012. Analysts project around $1.90 a share in FY 2013, but that is sure to go up after this announcement.
- Consensus earnings estimates for FY 2012 and FY 2013 had already gone up in the past two months, even before today's announcement.
- The stock sells for a cheap five-year projected PEG (0.91) and has approximately 10% of its market capitalization in net cash.
- It sells for less than 14 times forward earnings (which will be revised up), a significant discount to its historical average (21.6).
Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in CALL over the next 72 hours.