J2 Global Inc (JCOM): Why the 80/20 Principle Will Do This Company a World of Good

Expand cloud computing

j2 Global’s cloud business segment is preforming well, despite threat from competitors such as salesforce.com, inc. (NYSE:CRM).

Salesforce is an ever-growing cloud computing and collaboration-relationship-management application developer (CRM). It’s all a really convoluted way of saying that Salesforce.com helps with technology-based solutions to enhance a company’s relationship with customers.

salesforce.com, inc. (NYSE:CRM) specializes in more application-based solutions and continues to steadily gain revenue and popularity. Salesforce, while bringing in 7 times as much revenue as j2 Global, continues to lag behind in efficiency. Salesforce has a gross margin of 78% compared to j2 Global’s gross margin of 81%.

j2 Global has the lead in efficiency, but the large market share of Salesforce could hurt j2 Global in the future. j2 Global needs to expand and capture more market share in order to follow the 80/20 principle.

Still set to explode

j2 Global is still a great growth opportunity for investors. While j2 is much smaller than Salesforce or Facebook, it has more significant sales relative to its size. j2 Global sports a 4.62 price to sales ratio. Salesforce, on the other hand, almost doubles that ratio at 8.79. Facebook comes in at nearly a 12 p/s ratio.

j2 Global seems to have exploded in popularity. And while the very unique company has potential problems with market share and segment management, j2 Global should do well in the long run. j2 Global sits at an earnings multiple of only 16. Compared to the industry average of 55, the company is still a great value play as well.

The article Why the 80/20 Principle Will Do This Company a World of Good originally appeared on Fool.com and is written by Ryan Gilbert.

Ryan is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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