Valassis Communications (VCI) continues to soar after its latest earnings report. Earnings came in well ahead of expectations and the company raised guidance.
Valassis is a media and marketing company operating in 4 segments: Shared Mail, Neighborhood Targeted, Free-standing Inserts and International Digital Media.
On Apr 29 Valassis reported first-quarter earnings of 41 cents, 11 cents higher than the Zacks Consensus Estimate. The company received a $500 million payout from a litigation settlement, which was not included in the EPS number.
Excluding that settlement net income still rose more than 60% to $21.1 million. Valassis's CEO said the company is shifting from a defensive cost cutting strategy to revenue growth.
After the successful quarter Valassis decided to raise its projections and analysts weren't far behind. The consensus for the Zacks #1 Rank stock (strong buy) is up to $1.86, from $1.79.
Next year's average estimate is up 6 cents to $2.56. These projections would yield annual growth rates of 48% and 38%, respectively.
Shares of VCI are trading at 18 times forward earnings, not bad but slightly higher than the industry average. The PEG ratio is coming in at 1.2 and the price-to-sales is about 0.7 times.
These valuations are a bit higher than I typically like to see, but Valassis is the top rated company in the fifth ranked industry, out of 264.
Shares of VCI have up exponentially over the past year, but as long as estimates continue to surge the run is sustainable. Even in the tumultuous May that we have had, Valassis is still setting new 52-week highs on strong volume.