1 Less Reason to Believe in Vonage Holdings Stock

As CEO Marc Lefar prepares to step down, a Fool examines the key drivers for Vonage Holdings stock.

Tim Beyers
Tim Beyers
Apr 22, 2014 at 3:00PM
Technology and Telecom

Vonage Holdings (NYSE:VG) stock is down more than 2% since CEO Marc Lefar announced plans to retire after his replacement is found. He may be leaving at just the right time, Fool contributor Tim Beyers says in the following video.

Lefar deserves credit for keeping Vonage relevant in an increasingly competitive market. Indeed, the company has earned profits in each of the past three fiscal years despite declining revenues. Improving gross margins are the likely catalyst.

Yet in most other areas, Vonage's key indicators are trending poorly. Returns on capital have declined in each of the past three years and now sit at just 7.8%, down from 31% in 2011. Cash flow from operations is down sharply over the same period, leading the company to take on more debt.

There's also increasing competition to consider. Microsoft (NASDAQ:MSFT) recently bulked up Skype with a new broadcast-ready version while Google continues to offer free and quite usable voice and video over IP with Google Plus. Add it up, Tim says, and there's no reason to believe new management will produce the sorts of returns for shareholders that Lefar did. (Up more than 160% since joining Vonage as CEO in late July 2008.)

Now it's your turn to weigh in. Do you believe Vonage can overcome competition and deliver value to shareholders? Why or why not? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short Vonage Holdings stock at current prices.