J2 Global (Nasdaq:JCOM) is a small-cap provider of online fax, voice and email solutions for individuals and smaller businesses. It characterizes its collection of services as cloud-based offerings, and is experiencing very steady growth trends. Combined with a reasonable valuation and above-average dividend yield, the stock could be of interest to investors, or other business rivals.

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Recent Developments
J2 Global recently kicked off its first quarter and reported sales growth of 18.1% for total sales of $86.7 million. The company ended the quarter with approximately 1.3 million user accounts that resulted in average monthly revenue of $14.40 per user. The cancellation rate ticked up to 2.8%, but still remained pretty low.

The strong top-line growth and slight decline in operating expenses resulted in solid operating income growth of 63% to $33.2 million. However, last year's quarter included an income tax credit, which meant that reported profits fell slightly to $28.5 million. This worked out to 60 cents per diluted share. Management's estimate of free cash flow was $38.1 million, or approximately 81 cents per diluted share.

SEE: Understanding The Income Statement

Outlook and Valuation
For the year, J2 projects revenues between $345 million and $365 million. Analysts are expecting nearly 4% annual growth and total sales of nearly $354 million. The company expects minimal to no earnings growth, and analysts are currently anticipating profits of $2.55 per share. This puts the forward P/E at only about nine. This is well below the industry average of 13.2 and even farther below the market average of 15.3.

SEE: 5 Must-Have Metrics For Value Investors

The Bottom Line
J2 has a solid track record of double digit sales and profit growth. It has managed this feat over both the last three and five year periods. Growth is expected to trend down slightly over the next couple of years, but the rock bottom valuation should help offset any forward growth concerns. The current dividend of 3.6% is also quite appealing and further demonstrates that the company has plenty of excess capital to send to its shareholders.

SEE: Earning Forecasts: A Primer

The solid growth trends and reasonable valuation could be of interest to a rival telecom provider. Verizon (NYSE:VZ) and AT&T (NYSE:T) could potentially fold it into their operations, but would have to scale the business substantially to have it impact their operations. Perhaps even Liberty Interactive (Nasdaq:LINTA) or IAC/InterActiveCorp. (Nasdaq:IACI) would be interested and have a history of acquiring other online content providers.

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At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.

Tickers in this Article: JCOM, LINTA, IACI, VZ, T

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