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Here's Why You Should Dump j2 Global From Your Portfolio

On Apr 3, j2 Global, Inc. JCOM was downgraded to a Zacks Rank #5 (Strong Sell).

Of late, the stock has been witnessing downward estimate revisions. The Zacks Consensus Estimate for fiscal 2018 declined 8 cents to $6.02 over the last 30 days. However, consensus estimates for fiscal 2019 has remained steady at $6.48.
    
The negative estimate revision was primarily due to disappointing fourth-quarter 2017 results. The company’s earnings of $1.79 per share missed the Zacks Consensus Estimate by a couple of cents.

Notably, j2 Global lagged the Zacks Consensus Estimate in the trailing four quarters, recording a negative average surprise of 2.59%.

Moreover, leveraged balance sheet as well as increasing integration risks rising from frequent acquisitions is anticipated to stall growth in the near term.

Shares of j2 Global have lost 7.1% in the past year against 33.1% rally of the industry it belongs to.



 

Factors Affecting Growth

We expect higher costs pertaining to sales and marketing to limit bottom-line growth in the near term. In the fourth quarter of 2017, total operating expenses surged 35.4% from the year-ago quarter to $194.2 million.

Moreover, increasing costs related to the company's frequent acquisitions are also projected to hurt the bottom line. In the last quarter, the company completed four acquisitions.

Additionally, j2 Global has a highly leveraged balance sheet, which is a significant concern. In the fourth quarter, long-term debt increased 66.2% to $1 billion. Further, ratio of its long-term debt-to-equity currently is pegged at 98%.

Free cash flow also declined almost 9% on a year-over-year basis.

Stocks to Consider

Nice NICE, Paycom Software PAYC and Veeva Systems VEEV are stocks worth considering in the same sector. All the three stocks sport Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Nice, Paycom and Veeva are currently pegged at 12.50%, 24.75% and 17%, respectively.

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j2 Global, Inc. (JCOM) : Free Stock Analysis Report
 
Paycom Software, Inc. (PAYC) : Free Stock Analysis Report
 
Veeva Systems Inc. (VEEV) : Free Stock Analysis Report
 
Nice Ltd. (NICE) : Free Stock Analysis Report
 
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