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Stamps.Com Up ~30% Following Better Than Expected 2Q17 And Raised Guidance

Summary

Stamps.com reported better than expected 2Q17 results and raised guidance for revenue and EBITDA.

We expect free cash flow and ROIC should continue to move higher for at least the next few quarters due to its strong operating momentum.

The stock was added to our theoretical model portfolios on July 31.

This is an update to our model portfolio report, 33 Stocks for August 2017.

Stamps.com Inc. (STMP) is up 30% midday today following yesterday's report of better than expected 2Q17 results and raised guidance.

Revenue of $116.14m was 16.9% higher than consensus of $99.29m, and EBITDA of $58.06m was 8.6% higher than consensus of $49.43m.

Ken McBride, Chairman and CEO, commented in the earnings release, "...We reached our highest level of paid customers and average revenue per paid customer, we saw continued strong growth in our shipping business areas, and we experienced strong contributions from all of our subsidiaries."

Guidance for revenue was increased to $435-460m, up from $405-430m. Adjusted EBITDA was increased to $220-240m, up from $205-225m. Adjusted EPS was increased to $7.50-8.50 from $7.00-8.00.

The company has $110m cash and $134m total debt, for a total enterprise value of $3.6b. Free cash flow improved from $40m in 1Q16 to $123m in 1Q17. Given the better than expected results in 2Q17 and raised guidance, we expect free cash flow and ROIC to continue to improve for the next few quarters. 

Update 9pm: the stock has reached our price target and the position will be assumed closed in the theoretical model portfolio strategies at the end of trading tomorrow. 

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: As a simple quantitative model based on fundamental rankings, the portfolio models do not take into account rumors or pending M&A transactions. Theoretical return data reflect simple cumulative returns (not compound returns) and do not assume the impact of costs such as execution fees, margin fees, slippage, the availability of stocks for short selling, or any other kind of cost. There are limitations inherent in our theoretical model results, particularly with the fact that such results do not represent actual trading and they may not reflect the impact material economic and market factors might have had on our decision making if we were actually managing client money. We do our best to provide accurate information in this report, but do not guarantee its accuracy.