Vonage Holdings Corp. (NYSE:VG)

recycle -30

It's funny to me how many people are still downthumbing this one. Things have changed in the last couple of years. The company has turned into a cash cow, time to milk it.

magic jack is much cheaper and better..why waste my money on vonage

following the leader

undervalued, poised for a comeback

'Twas on 1-10-11 when I smelt a musty odor coming through the lenses of the Smelloscope.

Vonage Holdings (VG) was the culprit. VG only received 30 points out of 100 in the Smelloscope scoring system. Here's why:

-Poor earnings
-A negative book value per share
-Negative Net Profit Margin, ROA% and ROE% and concerning 5 year trends
-Unfavorable insider activity
-Inconsistent 5 year debt to equity ratio

The bottom line:

I don't claim to know a lot about Vonage. But I do know their fundamentals don't look good. And I know that there are a lot of other companies in their industry which are significantly outperforming them.

That being said, I wouldn't put real money on this down-thumb because they appear to have some potential for recovery and eventual growth. One indicator that they are doing something right, is that they don't have a whole lot of long term debt and a very impressive price to sales ratio.

Regardless of VG's impressive price to sales ratio, they're still stinky enough to set off the stankometers and ranked in the lowest 10% of any of the stocks the Smelloscope has sniffed.

So thumbs down it is.

~djshagggyd
(official nose of the Stankometer)

Full Discloser:
TheSmelloscope is a value rating system created to evaluate stocks for fun. It is operated by a novice investor named djshagggyd. NOVICE being the key word. Do not follow the Stankometer's advice without conducting your own due diligence.

of all the telecom stocks this company is has better plans. everyone that I know in my family has Vonage. my friends are getting Vonage or at least know what Vonage is about. look at 8x8 and read their reviews by customers. They are fed up of the company.

Most certainly many investors have not forgotten the tragic and dissapointing Vonage IPO that shattered many people's dreams. But it is time to find it in ourselves to put aside our biasness otherwise we are guilty of admitted ignorance in refusing to allow that Vonage might have truly found itself on the road to recovery and even more so. Some demonstrate a tendency at a sworn vendetta against Vonage. I refuse to allow for such sentiments. I have decided to make amends with them. And why not? It could be a great opportunity to bounce back from losses suffered through them.

Stock chart shows a Symmetrical Triangle breakout on huge buy side volume that suggests professional traders taking early positions.

solid product, with globalization happening and solid growth... why not...

I wish I could hit underperform more. The company was built on an already obsolete technology.

Might be taken over by Google

VZ 2 Expensive

The voice-over-IP phone service provider is onto something with the hyper-affordable Vonage World calling plan, and the company is a master of the cash conversion cycle.

Investing is all about looking forward. Things change, quickly sometimes.

Since it seems that VG analysts are inept, just don't care, or lazy, and are ALWAYS way behind on earnings, and forcasting, I feel the necessity to look forward, extrapolate from the numbers we know and try to give an Idea where this will be in six months.

CASH FLOW

http://www.acronet.net/~dgroves0/balance.JPG

Last quarter Free Cash flow was $.09 a share.

http://finance.yahoo.com/q/cf?s=VG

That translates into $.36 a year, if continued.

Ttm free cash flow is $.25 http://www.mysmartrend.com/news-briefs/news-watch/shares-vonage-rank-highest-terms-cash-flow-alternative-carriers-industry-vg-t

so $.36 is no big stretch.

Now look at the industry chart:

http://biz.yahoo.com/p/846mktd.html

And you will see that the Diversified Communication Services, Price to Free Cash Flow ratio, is an average of 40 which translates to a PPS of $14.40 a share!

EARNINGS

The analysts are Woefully behind. they say -$.03 in the 4th quarter, its +$.03, in the first, $.00, it was $.06.

If you look at finvar or yahoo, you will see they are predicting $.09 for next year! Idiots, they made $.06 last Qtr! It will probably be 4x as much!

4th = $.03 1st = $.06 Extrapolate the 2nd and the 3rd as $.06 each (same as the 1st) and we end up with $.21ttm earnings (I think earnings will be higher)

Why look 4 months ahead? Vonage had a non-cash charge in 3rdQ09, that gums up the earnings and it will roll off the ttm Earnings.

http://www.acronet.net/~dgroves0/netincome.JPG

In 4 months, after the 3rd QTR Earnings CC when the ttm Earnings are $.21, a very conservative 14 PE would make this $3.00.

Looking here though, you will see the Diversified Communication Services INDUSTRY PE IS AN AVERAGE 28.4

http://biz.yahoo.com/p/846mktd.html

Using that PE you will see those $.21 in ttm earnings translate into $6.00

gamble stock buy around 1.88

Great product, great marketing, great sales numbers. What more could you want?

Vonage has been a remarkable turn around story under CEO Lefar, Left for dead, forced to borrow large sums of money at very high interest rates at the bottom of the crash, the company has bounced back by focusing on customer service and by introducing popular plans like the World Plan where you can call 60 countries around the world for a flat fee and the basic plan that is only $10 a month. Churn is down and the company has been making actual profits for the first time in its life. If they can innovate in the mobile space (something they are working on), they can continue to stay relevant even in the age of Skype, at least for a while. They face competition from cable triple plays but the quality and network of Vonage is superior - and many longs believe eventually that they will be purchased by a big telco that will want to purchase their 2.6 million plus customers.

Vonage is like DirecTV - everyone hated the company when DirectTV began - till I went for their 1st million customer event. Now they're like 16 mil and counting. Why would DirecTV not want to sell VoIP - its 2 out of triple play ? Do you see any other company selling VoIP alone with 2.5 mil customers ? ATT/Qwest does not offer you Long Distance detailed billing !!!!! Right behind VoIP is a whole generation of IPVideo phones - now priced perfectly - and Vonage is suited to be in that biz.