[BadBoyBenny]

Who are they?

From Yahoo Finance

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j2 Global Communications, Inc. provides outsourced and value-added messaging and communications services worldwide. It offers faxing and voicemail solutions; document management solutions; hosted email, email perimeter protection, and email marketing services; call management; and conference calling services. The company also offers integrated solutions to replace or augment individual and corporate messaging and communications services. As of April 19, 2005, j2 Global Communications delivered its services through its global telephony/Internet protocol network that covered approximately 1,500 cities in 22 countries across 5 continents. The company serves individuals, small to medium-sized businesses, enterprises, and government organizations. j2 Global Communications was co-founded by Jaye Muller and Jack Riley in 1995. The company is headquartered in Hollywood, California.

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Form their last 10-Q

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Our core services include fax, voicemail, email, call management and conference calling and a bundled suite of these services. These are business services that make our customers more efficient, more mobile, more cost-effective and more secure than traditional alternatives. We generate substantially all of our revenue from subscribers that pay activation, subscription and usage fees. We also generate revenue from advertising and revenue share on premium rate DIDs issued to non-paid subscribers (sometimes referred to as “Free” subscribers). Of the more than 9.0 million telephone numbers (or DIDs) deployed as of March 31, 2005, approximately 598,000 were serving paying subscribers, with the balance deployed to Free subscribers.

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Some numbers I like about the business

High margins
Virtually no debt
High growth
Reasonable valuations

Note that they have had very consistent growth throughout the short life of the company. The income statement shows a dip in earning from 03 to 04 but that was because they did not have to pay taxes prior to 2004 due to losses incurred when the company was starting up.

A lot of their past growth was through acquisitions, which can bother some people, but they were paid for by cash from operations and not debt. They also seem to have been synergistic with their previous operations as the acquisitions were for complimentary products that they now offer as part of a product suite (eFax is the biggest by far).

I don’t know who their direct competitors are, but if the only ones are the ones that yahoo lists, they are the most profitable and the biggest player.

There seems to be a decent amount of people selling this on short, I haven’t yet heard a case why based on business fundamentals or valuation. Can someone who knows something about technical analysis explain if there is a technical reason this would be sold short? There are less short shares outstanding this month than last month though.

Other financial statistics

EV/FCF
23.8

PEG – expected 5 year
0.65

ROE
27.6%

Disclaimer: I own shares of this stock in my Ameritrade account. I posted it on this forum a long time ago but can’t seem to find it with the search function.