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Bull of the Day: RingCentral

David Borun
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Bull of the Day: RingCentral

RingCentral (RNG) provides a cloud-based communications system that allows businesses of all sizes to manage telephone contacts in a simple and cost-efficient way.

Their flagship service, RingCentral Office, allows businesses to maintain multiple telephone numbers and/or extensions without purchasing or maintaining any equipment or hiring additional staff. Customer calls can be forwarded automatically to any phone number, including mobile numbers and voice communications and messages are managed according to easy to use parameter settings for rule-based call routing and answering.

Time-based hoice allow calls to be routed differently based on whether or not they are received during business hours and 24-hour emergency options are available.

Especially for small business owners, RingCentral services can take the place of several employees, ensuring that customer communications are routed quickly and accurately to the appropriate party. In most cases, RingCentral’s role is invisible to the customer – they simply get the correct person or department right away, reducing the wait times and frustrations of many automated call systems.

Even a sole-proprietor service business can manage communications as well as large companies using nothing more than a laptop and a smartphone – along with RingCentral apps and services.

Founded in 1999, RingCentral avoided venture capital financing for the first seven years, “bootstrapping” its impressive growth with its own revenues.

RingCentral’s services are sold on a subscription basis, which makes their revenues “sticky.” Once a business establishes service, acquires phone numbers - which are then distributed to their own customers - and sets up a hierarchy for call management, they tend to continue using RingCentral indefinitely because the cost of changing everything would tend to drastically outweigh the continued cost of the subscription.

Subscription revenues in Q2 increased 32% year over year to $146 million.

RingCentral raised guidance for full year 2018 for subscription revenues, total revenues and net earnings.

RingCentral has exceeded analyst earnings estimates for the past 13 quarters with an average surprise over the past year of 32%. The shares are up 74% in 2018 and 10 upward revisions in the past 60 days earn RingCentral a Zacks Rank #1 (Strong Buy).

Despite the strong earnings performance, RNG shares have pulled back off of all-time highs over the past month, setting up a buying opportunity. Though still far from a value stock with a forward P/E ratio of 125X, RingCentral gets a growth style score of “A” and a momentum score of “B.”

With a market cap just shy of $7 billion, RingCentral represents is a technology growth stock with plenty of room to grow into an increasingly in-demand market.

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