Is Stamps.com Inc. (STMP) Destined for Greatness?

Investors love stocks that consistently beat the Street without getting ahead of their fundamentals and risking a meltdown. The best stocks offer sustainable market-beating gains, with robust and improving financial metrics that support strong price growth. Does Stamps.com Inc. (NASDAQ:STMP) fit the bill? Let’s take a look at what its recent results tell us about its potential for future gains.

What we’re looking for
The graphs you’re about to see tell Stamps.com Inc. (NASDAQ:STMP)’s story, and we’ll be grading the quality of that story in several ways:

Growth: Are profits, margins, and free cash flow all increasing?

Valuation: Is share price growing in line with earnings per share?

Opportunities: Is return on equity increasing while debt to equity declines?

Dividends: Are dividends consistently growing in a sustainable way?

What the numbers tell you
Now, let’s take a look at Stamps.com Inc. (NASDAQ:STMP)’s key statistics:

STMP Total Return Price data by YCharts.

Passing Criteria	3-Year* Change	Grade
Revenue growth > 30%	43.8%	Pass
Improving profit margin	194.8%	Pass
Free cash flow growth > Net income growth	54.6% vs. 324%	Fail
Improving EPS	305.9%	Pass
Stock growth (+ 15%) < EPS growth	337.3% vs. 305.9%	Fail

Source: YCharts. * Period begins at end of Q1 2010.

STMP Return on Equity data by YCharts.

Passing Criteria	3-Year* Change	Grade
Improving return on equity	163.5%	Pass
Declining debt to equity	No debt	Pass

Source: YCharts. * Period begins at end of Q1 2010.

How we got here and where we’re going
Stamps.com Inc. (NASDAQ:STMP) puts together a solid performance, missing out on a perfect score primarily because net income has surged past free cash flow. Despite this issue, Stamps.com Inc. (NASDAQ:STMP) shares have hit new peaks since emerging from the crash of 2008, and if EPS nudges higher over the next few quarters, the company could easily pick up another passing grade. But does that mean Stamps.com Inc. (NASDAQ:STMP) will keep outperforming in the future? Let’s dig a little deeper.