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In 2005, the U.S. government estimated there were more than 25 million small businesses nationally. These small companies, many of which are dad-run, rely on companies such as Dell (NASDAQ:DELL) and Adobe (NASDAQ:ADBE) to provide efficient technologies that allow them to compete with the big dogs.
Another company proving itself a friend of the fast-moving small business is Motley Fool Hidden Gems watch-list stock j2 Global (NASDAQ:JCOM). The company unifies communications, offering services to translate voice mail to email and faxes to email; it even provides automated receptionist services. With j2 Global's outsourced communications services, small companies can make themselves look like big companies, and big companies can reduce costs.
Judging by j2 Global's growth over the past several years, there are millions of companies around the world doing just that. The company's stock has risen 982% over the past five years, making the $1.6 billion company one of the market's best-performing stocks. The stock's gains have followed from years of pleasing revenue and free cash flow growth.
But the past is the past: What matters more to investors is the future. Despite the eye-popping gains in the company's shares, I think the stock still has room to run for several reasons. For starters, j2 Global is the market leader in electronic fax and unified communications services. Not only does the company have an extensive customer base of small businesses, it is also developing a clientele of larger companies that purchase services in bulk for their employee base.
The company services these customers with an extensive global network that includes an inventory of millions of local numbers across 40 countries. This network took years to develop and serves as a sizable moat, even to larger players such as Microsoft (NASDAQ:MSFT) or Salesforce.com (NYSE:CRM) that would like to duplicate j2 Global's services for their own small-business clients. Without an owned network of similar scale, competitors are at a disadvantage in terms of quality and reach.
While the stock is priced at a premium, the company holds considerable leverage in its target markets. j2 Global was even able to raise prices last year. Couple this capability with ample room for global growth and you have the makings for a long-term winner.
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j2 Global is one of several companies on Tom Gardner's watch list for his market-beating Motley Fool Hidden Gems newsletter service. To see what market-beating stocks he formally recommends, take a free 30-day trial.
Fool contributor Dave Mock communicates simply, but it still tends to confuse more than help. He owns no shares of companies mentioned here. Dave is the author of The Qualcomm Equation. Microsoft and Dell are Inside Value selections. Dell is also a Stock Advisor selection. The Fool has a disclosure policy.
