Stamps.com's Wacky Multiple (STMP)

Please don't misunderstand. Stamps.com (NASD:STMP) has a nifty business. The company is one of the leading providers of Internet-based postage services. Maybe the leader. The company's PhotoStamp products, which allow people to put their own photo content onto their postage stamps, is a hot idea and the company shipped about seven million PhotoStamps in Q4 05, a big increase over previous periods.

Revenue last year rose from $38.1 million in 2004 to $61.9 million, a 62% clip. The fourth quarter grew even faster with revenue up 76% to $20.6 million. For the full year the company had income from operations of $8.4 million compared to a loss of approximately $7 million in 2004.

But, guidance is for things to slow down a bit: The company expects 2006 revenue to be between $75 and $90 million, a pretty wide range, and much slower than either Q4 05 or full-year 2005 growth. At the lower end of guidance, the Stamps.com's revenue would only go up 21%. Talk about full flaps.

Stamps.com's stock has gone from $15.05 in the 52-week period to almost $37. With a market cap that is nearly 14 times revenue, this puts them well ahead of companies like Yahoo! (NASD:YHOO) and EBay (NASD:EBAY) in that department.

It is worth noting that Stamps.com devotes a lot of space in its 10-K to Pitney Bowes (NYSE:PBI) as a competitor. The Pitney Bowes postage meter business gets hurt by a service like Stamps.com, so the business equipment behemoth has made several attempts to move into the online end of postage. It's probably safe to assume that they are not going to give up.

STMP 1-yr Chart

Douglas A. McIntyre is the former Editor-in-Chief and Publisher of Financial World Magazine. He was also president of Switchboard.com when it was the 10th most visited website in the world, according to MediaMetrix. He has been chief executive of FutureSource, LLC and On2 Technologies, Inc. and has served on the boards of TheStreet.com and Edgar Online. He does not own securities in companies he writes about. McIntyre can be reached at [e-mail].