This column is for investors willing to take more risk and potentially receive more reward.  The stocks mentioned in this column are not recommended to buy or sell.  They're brought to your attention so you can investigate them further to determine if they fit your risk profile.  Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings.  And some will have tremendous stories.

May 27, 2008 - J2 Global (JCOM-NASDAQ) Customers of j2 Global Communications can retrieve e-mail, faxes, and voicemail from a single phone line. Customers receive a private phone number that can handle unlimited incoming messages. The company, formerly known as JFAX.COM, operates primarily under the eFax, JFAX, and jConnect brands and claims more than 11 million phone numbers for customers located in 37 countries worldwide, including major US cities and international business centers such as Frankfurt, London, and Tokyo. The company counts more than 900,000 paid subscribers with the balance of phone lines going to advertising-supported free subscribers.

It's taking a breather after hitting that all-time high last year, off about 35%. So it might a good time to look a little closer. First, the earnings have been the fuel for this rocket (suprise! surprise!). In 2001 they were a negative 17 cents a share (after being negative 61 cents the year before). Then they went positive, to 30 cents a share, followed by 71 cents, then 64 cents. In 2005, they hit 88 cents, went to $1.04 and last year hit $1.35. This year, analysts are looking for $1.61, then $1.87 for 2009. Overall, analyst predict earnings growth of 18% a year, on average for the next 5 years. Over the last 5 years, they averaged 31% a year.

Sales have been ramping as well. In 2005, they were $144 million, followed by $181 million and $220.7 million. Analysts think this year the top line will show $248.11 million and next year $283.46 million.

One sector that is slowing for j2 and other communciations providers is financial services. With large losses in mortgage securities and the need for curtailing costs, banks, investment banks and other financials are using less of j2's services. When this sector comes back to its normal growth of about 15% a year is anyone's guess, and until it does, both sales and earnings growth will be slower for j2 than previous years.

j2 is buying back its own stock, rather aggressively. In the last quarter of 2007, it bought 3.5 million shares. That took total outstanding shares from 48.6 million to 45.1 million. With more recent buying, share total is down to 44.4 million. It has lots of cash to work with: $167 million. There's no debt on the books. Current assets are over 4.5 times current liabilities.

Other numbers: Return on Equity is an eye popping 24.2%. Over the last 4 years, it's been 20.9%, 22%, 22.6% and 34.8%. Net profit margin was 31% last year. Book value is $5.81. Price to earnings ratio has been between 13.6 and 24.6 the last 6 years. At the current rate of 18, it's closer to the low end of the range. There is no dividend. Daily trading volume was 616,000 shares over the last 30 days.

j2 Global ran for 6 years and gave investors great returns. Now it's slowing growth as the financial sector cuts back costs. Can j2 resume its outstanding earnings growth when the financials return or will competition erode some of its market share? Time will tell.

- Company Web site: www.j2global.com

- Ted Allrich