STMP Undervalued

STMP is undervalued following a sell-off after earnings , which were great but apparently not enough.

STMP current valuation metrics ( TTM ): 18.35 P/E, 4.13 P/S and 3.2 P/B. For the year of 2020, its revenue was 758M and it grew up over 30%. They also boasted a large 22.6% Profit Margin which is unparalleled by most companies. As smaller businesses continue to grow and expand, most of them resort to and use Stamps.com for their postage and shipping needs and this sector isn't expect to contract by any large means anytime soon.

Peer Analysis:
  • STMP: 18.35 P/E, 3.2 P/B, 4.13 P/S, 1.5 PEG with a 22.6% Profit Margin.
  • UPS: 20.1 P/E, 192.7 P/B, 1.69 P/S , 1.91 PEGY with a -13.1% Profit Margin.
  • FDX: 19.1 P/E, 3.25 P/B, 0.91 P/S, 0.94 PEGY with a 5.96% Profit Margin.
  • AMZN: 73.3 P/E, 16.43 P/B, 3.95 P/S , 2.63 PEG with a 5.75% Profit Margin.
  • EBAY: 16.19 P/E, 10.58 P/B, 3.64 P/S , 0.54 PEGY with a 29.5% Profit Margin.

From the above data (from Bloomberg), we can clearly see that the only fair-valued peer is EBAY . But, for now, focusing on STMP , we can see that STMP's Price/ Earnings is towards the lower end, if not, on par with its peers . Its Price/Book is the lowest among its peers revealing that it is the strongest one of the group financially that justifies its value. However, the main differentiating factor is that it has a high 22.6% profit margin which is towards the upper end among its peers . Stamps also owns around 8 more subsidiary companies such as Metapack and Encidia and its latest presentation highlighted that it is expecting to grow its footprint internationally in countries such as Mexico and New Zealand, which might add to the expenses but should grow revenue exponentially in the long term.

Now that we understand that STMP is undervalued, if not at fair-value , we can now look at the price action chart to plot our trading strategy. The attached chart clearly reveals the rangebound nature of STMP and how it is trading towards the bottom of it right now. It is still heavily discounted and allows us to still enter and profit.