Why Web.com Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of domain registry service Web.com Group (NASDAQ: WEB  ) rallied as much as 13%, after reporting better-than-expected fourth-quarter earnings results.

So what: For the quarter, non-GAAP revenue increased to $126.2 million, well ahead of the company's previous forecast of $124 million to $125.5 million, and non-GAAP income per share increased to $0.45, from $0.28 in the year-ago period. Web.com's profit edged out Wall Street's expectations by $0.03. The company also hit a milestone of surpassing 3 million subscribers during the quarter, and saw average revenue per user, or ARPU, advance 2.1%, to $13.77, from the sequential quarter, and 7.1% from the year-ago period.

Now what: With the move away from paper and onto everything digital, more and more small businesses are turning to Web.com for domain registry management services, and it's showing in the company's top and bottom lines. Web.com is successfully reducing its debt and, most importantly, expanding how much it receives from each user (the aforementioned ARPU). At just eight times forward earnings, Web.com is incredibly inexpensive, and I see no reason why it couldn't head higher following this optimistic report.

Craving more input? Start by adding Web.com Group to your free and personalized Watchlist so you can keep up on the latest news with the company.

Want a look at another potentially undervalued company? Read on...
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