It's fairly rare for a company to report annual gains of 35% revenue growth, 49% earnings growth, and 45.7% growth in earnings per diluted share -- yet see its stock knocked down by more than 6% the next day. But that's precisely what happened to Internet fax and voicemail service provider J2 Global Communications (NASDAQ:JCOM) on Tuesday.

The question is: What's the rest of the story? And does it warrant the reaction?

Well, part of the story is in the quarterly numbers, which are admittedly important. Sometimes, paying attention to quarterly numbers will reveal a trend. For the fourth quarter, analysts were expecting $0.52 per diluted share in earnings and revenue of $40.23 million. J2 Global missed both estimates, reporting $0.51 per diluted share and $39.14 million in revenue. So yes, J2 Global missed on both marks, but some misses are more important than others.

Before we go any further, I should disclose that I own a small amount of J2 Global shares. I find today's decline interesting, because J2 Global's guidance for fiscal 2006 calls for more of the same: solid growth next year. The company expects revenues to fall between $181 million and $191 million next year and earnings per diluted share (before stock option expensing, which I'd prefer the company included) to be $2.34 to $2.46. For reference, the company reported $143.9 million in revenue and $1.85 in earnings per diluted share for fiscal 2005.

If we take $185 million as a revenue estimate and $2.40 as the EPS estimate, we see that the growth next year would be 28.6% for revenues and 29.7% for earnings per share. Stock options would take $0.10 to $0.18 off of the $2.40, which changes things a bit, but we're still talking about strong growth in the business.

Here's where things get interesting. J2 Global's P/E multiple based on the $1.85 figure is 22.3, and its free cash flow for the past year was $55.5 million, or about $2.15 a share for a price-to-free cash flow multiple of 19.2. Normally, such ratios aren't considered cheap, but given the high level of growth that J2 Global has displayed over the past few years -- and what's on tap for next year -- the valuation ratios seem reasonable to me.

My main concern with J2 Global over the past couple of years has been competition, and I could understand the shares trading at a slight discount for that reason. In particular, I've always figured that VoIP offerings from companies such as Skype, which is owned by eBay (NASDAQ:EBAY), would eventually intrude upon J2's email faxing turf. But the company stated on its conference call that it hasn't seen this happening, and if it does happen, J2 plans to defend its patents and go after the offending companies. Such statements sound aggressive until you consider that the company has had some success in going after competitors that violate its patents. On its conference call, the company stated that it's taking in $400,000 to $600,000 per quarter in royalties.

Summing it all up, I find today's drubbing a bit shortsighted and the shares slightly undervalued. As a shareholder, I'd like to see the company put some of its cash to work repurchasing shares, but I'll have to wait and see on that front.

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Nathan Parmelee owns shares in J2 Global but has no financial stake in any of the other companies mentioned. The Motley Fool has an ironclad disclosure policy.