What: Shares of Internet postage company Stamps.com Inc. (NASDAQ:STMP) jumped 10.5% in the month of May, according to data provided by S&P Global Market Intelligence, after the company reported massive growth in the first quarter of 2016.
So what: Revenue jumped 86% in the quarter to $81.8 million and non-GAAP earnings per share were up 139% to $1.72. Some of the growth comes from the integration of the Endicia acquisition and resulting cost savings, but the large increase in earnings shows some solid operational momentum.
To put the market's surprise in perspective, analysts were expecting revenue of $69.7 million and earnings of just $1.07 per share. On top of the earnings beat, management also said it expects full-year revenue of $310 million to $330 million and earnings of $6.00 to $6.50 per share.
Now what: Stamps.com is clearly gaining traction with customers large and small, surprising investors with how quickly it can turn that growth into profit. That's largely because mailing and shipping gross margin is a whopping 84.3%, giving incredible leverage to operational costs. If management can keep growing the top line and keep operating costs under control, there's tremendous upside for Stamps.com. And with shares trading at only around 15 times earnings, I think the long-term future looks bright for the company.