By PETE BARLAS, INVESTOR'S BUSINESS DAILY Posted 09/23/2010 06:30 PM ET
Stamps.com (STMP) continues to deliver for investors.
Shares of the small, longtime Internet-based seller of postage and shipping software are up 26%, since a recent low on July 6, to 12.07.
The company's ability to boost its core of small-office and home-office users, while making inroads with larger companies, has bolstered investor confidence, says Kevin Liu, an analyst for B. Riley & Co.
"Really what drives this business is being able to add new subscribers, reduce churn and increase (how much) each of those customers is spending with you," Liu said. "If you look back at all three of those metrics going back three to five quarters, they've continually improved."
Stamps.com had more than 338,000 paid subscribers as of June 30, up from 317,000 a year earlier. The company's churn rate — customers that leave — fell to 3.6% last quarter from 4.4% a year earlier.
Stamps.com sells its service by subscription. In the second quarter, the average monthly spend per customer rose to $17.91 from $17.50.
Its Q2 sales rose 5% to $21.2 million, not huge growth but better than the 6% decline in Q2 2009.
Liu says the decline a year ago is because Stamps caters mostly to small businesses, a sector "hit much harder in the recession than large businesses."
Basing a business on U.S. postage would seem dubious.
When its fiscal year ends Sept. 30, the U.S. Postal Service expects its mail volume will have fallen to 167 billion pieces from 177 billion in 2009, 203 billion in 2008 and 212 billion in 2007.
But Stamps.com's customers printed $99.3 million in postage in the second quarter, up from $83.1 million in the year-earlier period.
Stamps.com's customers say the service is a convenient timesaver.
Another plus for Stamps is the growing number of businesses that sell goods online, says George Sutton, an analyst for Craig-Hallum Capital Group. Online buyers get goods shipped to them.
U.S. online retail sales will jump to $223.9 billion in 2014 from $123.3 billion in 2008, says eMarketer. Stamps.com has to find ways to grow with the market, Sutton says.
"This is almost becoming a back-end way to play the growth in online commerce," he said. "As you do more of your purchases online, it requires a shipment that didn't need to happen before."
Stamps.com also has increased its push to serve larger companies that have networks of small offices in scattered locales, Liu says.