Stamps.com (STMP) reported its third-quarter earnings results last night, crushing analyst estimates and forecasting full-year earnings well above consensus as well -- and then its stock collapsed today, down 10.4% as of 12:40 p.m. EST.
Expected to report only $1.53 per share in pro forma profits for the third quarter, the online postage company earned more than twice that ($3.83) and reported better-than-expected revenue of $193.9 million as well, up 42% year over year.
Stamps.com's earnings according to generally accepted accounting principles (GAAP) came in a bit short of the pro forma number at $3.30 per share. But that was still up 528% compared with last year.
To top it all off, Stamps.com predicted it will end this year with pro forma profits between $10.35 and $11.35 per share, versus a consensus estimate of just $8.10. GAAP profits are likely to range from $7.30 to $8.27, well ahead of previous guidance.
In short, Stamps.com beat and raised in the third quarter, so why are shares down? Valuation is the easy answer. Even if Stamps.com maxes out its projected earnings this year, at a share price of about $227, its stock is valued at more than 30 times earnings, a price some might find rich.
Still, with revenue growing 40% and better, I can't say a 30-times earnings multiple is at all unreasonable. If Stamps.com keeps growing as it has been, for any length of time, the stock really does look cheap.