It's been an interesting week for earnings, capped off, so far, by Amazon's (AMZN) big miss that was announced yesterday. Not surprisingly, I am more interested in the "down-ballot" earnings releases -- those that are largely overshadowed by those of the much larger and more popular names.
Vonage Holdings (VG) put up some great numbers on Wednesday, and the name is trading very close to its 10-year high. Revenue of $248.4 million was slightly ahead of the $246.9 million consensus estimate, but the company blew away the $0.05 consensus earnings per share estimate, posting EPS of $0.09.
The shares rose as much as 18% intraday on Wednesday before settling up 10.5% on more than four times normal average volume. Vonage's focus on business solutions is clearly bearing fruit.
This is clearly not a name that many value investors would consider, but after switching to their VoIP solution for my business at the expense of Verizon (VZ) , a review of the financials revealed what I believed to be a great value, and it's been a very nice ride so far. It is also apparent that the company is making the Nexmo acquisition work. Less than six months ago its announcement of the deal was not well received by the markets. Since then, however, the shares are up more than 70%.
Vonage ended the quarter with $40 million in cash, and $348 million in debt -- a modest amount, in my view, considering the business that the company has built. I am also impressed by its stock repurchase discipline. Vonage has long been a fan of stock buybacks, but these are much more effective at lower prices, so after buying back $25 million at an average price of $4.11 during the second quarter, the company did not buy back a single share in 3Q.
VG currently trades at 26x next year's earnings expectations, which is not all that rich given the growth story here. (There, I used the "g" word).
As I mentioned in Wednesday's column, net/net boating retailer West Marine (WMAR) also announced 3Q results earlier this week. (Net/net companies trade below net current asset value.) Although the company missed on EPS ($0.15 vs. $0.17 consensus), and just narrowly beat on revenue ($191.85 million vs. $191.2 million), there was some good news.
One of West Marine's initiatives has been to achieve 15% of revenue via e-commerce. E-commerce sales rose 23.7% for the quarter (year/year), to 10.2% of revenue. There's still a ways to go, but this represents solid progress.
The company ended the quarter with nearly $94 million, or $3.70 per share, in cash, up from $60 million ($2.45 per share) for the same quarter last year. Also, the company has no debt, and currently trades at 0.86x net current asset value, and 0.63x tangible book value per share.
The next two quarters are low season for West Marine as the company books the bulk of revenue and earnings in the second and third quarters. However, we'll see if the company can make further progress, and dig itself out of net/net land, the place that no company ever enters by choice.