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Stamps.com (STMP) Hits 52-Week High, Can the Run Continue?

Shares of Stampscom (STMP) have been strong performers lately, with the stock up 46.6% over the past month. The stock hit a new 52-week high of $204.08 in the previous session. Stampscom has gained 142.9% since the start of the year compared to the 3.2% move for the Zacks Retail-Wholesale sector and the 15.8% return for the Zacks Internet - Commerce industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on May 7, 2020, Stamps.com reported EPS of $1.32 versus consensus estimate of $0.93 while it beat the consensus revenue estimate by 19.71%.

For the current fiscal year, Stamps.com is expected to post earnings of $4.51 per share on $586.6 million in revenues. This represents a -21.29% change in EPS on a 2.58% change in revenues. For the next fiscal year, the company is expected to earn $4.84 per share on $614.84 million in revenues. This represents a year-over-year change of 7.32% and 4.81%, respectively.

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Valuation Metrics

Stamps.com may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Stamps.com has a Value Score of C. The stock's Growth and Momentum Scores are B and A, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 45X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 39.6X versus its peer group's average of 23.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Stamps.com currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Stamps.com fits the bill. Thus, it seems as though Stamps.com shares could have a bit more room to run in the near term.

How Does Stamps.com Stack Up to the Competition?

Shares of Stamps.com have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including Draper Oakwood Technology Acquisition (RBZHF), eBay (EBAY), and Alibaba Group Holding (BABA), all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 20% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Stamps.com, even beyond its own solid fundamental situation.


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