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Vonage Q3 Earnings: Is NasdaqGS:VG Expensive at 71.6x Forward P/E?

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Vonage Holdings Corp. (NasdaqGS:VG) is scheduled to report Q3 earnings results before markets open for trading on November 5, 2020.

The company is expected to report earnings of $0.03/share on revenue of $308.3 million. The consensus earnings per share (EPS) of $0.03/share is based on a poll of 13 analysts and represents a growth in eps of 245.2% over the same quarter last year, when the company reported earnings of -$0.02/share.

The revenue forecast of $308.3 million based on a poll of 12 analysts implies a year-over-year (YoY) growth in revenue of 1.9%. Last year the company reported $302.5 million in revenue for the quarter.

Expected to report EPS of $0.03/share for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $308.27 $302.53 1.9%
EPS $0.03 -$0.02 245.2%

Earnings Call Trends

Historically, management has exceeded analyst expectations 4 out of the last 8 tracked quarters, missed 2 quarters, and met expectations 2 quarters.

What are your expectations from Vonage Holdings Corp. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $0.04 $0.04 0% Met
Q1, 2020 $0.01 $0.05 481.4% Beat
Q4, 2019 $0.05 $0.06 10.4% Beat
Q3, 2019 $0.07 -$0.02 −129.8% Missed
Q2, 2019 $0.03 $0.08 132.3% Beat
Q1, 2019 $0.03 $0.06 116.0% Beat
Q4, 2018 $0.06 $0.04 −38.1% Missed
Q3, 2018 $0.09 $0.09 0% Met

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −1.7%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 6, 2020 $12.74 $12.53 −1.7% Decline
May 7, 2020 $8.45 $9.38 11.0% Increase
February 18, 2020 $9.07 $10.08 11.1% Increase
November 6, 2019 $10.06 $8.32 −17.3% Decline

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −2.82, the model suggests that the company is not likely to be an earnings manipulator. A value of −2.82 implies a 0.2% chance of earnings manipulation.

Fundamentals And Technical Analysis

Vonage Holdings Corp. is currently trading at $10.42/share, down −2.5% for the day. The company is trading at approximately 81.1% of its 52-week high of $12.98/share. The company’s stock price is down −16.8% since the last earnings report and down −4.9% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 52.80 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NasdaqGS:VG Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of −71.76 and a forward P/E multiple of 71.62.

Vonage Holdings Corp.’s current share price also implies a price-to-book (P/B) multiple of 4.67. The following table summarizes some other key fundamental ratios:

Data as of October 28, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $10.42
P/E Ratio −71.8x
P/E Ratio (Fwd) 71.6x
PEG Ratio 0.1
Total Debt / Total Capital 17.7%
Levered Free Cash Flow $87.99 million
EV / EBITDA 30.3x

Finbox

Vonage Holdings Corp. is a mid-cap stock with a market capitalization of $2.625 billion and a total enterprise value of $3.143 billion. The company operates in the Communication Services sector and the Diversified Telecommunication Services industry.

Vonage Holdings Corp. provides cloud communications services for businesses and consumers. It operates through two segments, Business and Consumer. The Business segment offers cloud-based applications comprising integrated voice, text, video, data, collaboration, and mobile applications over SIP based VoIP network; API solutions designed to enhance the way businesses communicate with their customers by embedding communications into apps, websites, and business processes; and Vonage Business Cloud and Vonage Enterprise services. The Consumer segment provides home telephone services through various service plans with basic features, including voicemail, call waiting, call forwarding, simulring, visual voicemail, and extensions, as well as area code selection, virtual phone number, and Web-enabled voicemail. It also offers Vonage World and Vonage North America consumer plans. In addition, the company provides Vonage-enabled devices, which allow customers to use the Internet connection for their computer and telephones at the same time; and high-speed broadband Internet service that allows calls over the Internet either from a telephone through a Vonage-enabled device, or through soft phone software, or mobile client applications. Vonage Holdings Corp. sells its products through its sales agents, Websites, and toll free numbers for consumers and businesses in the United States, Canada, the United Kingdom, the European Union, and Asia. Vonage Holdings Corp. was incorporated in 2000 and is headquartered in Holmdel, New Jersey.

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