Alan Fournier (Trades, Portfolio) purchased a 181,804-share stake in Vonage Holdings Corp. (VG) at an average price of $4.72 per share in the second quarter.
Since Fournier’s purchase the company’s market price has risen an estimated 24%.
Vonage Holdings has a market cap of $1.26 billion, a price-earnings (P/E) ratio of 83.44, an enterprise value of $1.6 billion and a price-book (P/B) ratio of 3.04.
Headquartered in Holmdel, New Jersey, Vonage is a publicly traded telephone company that provides innovative, cloud-based, unified communications as a service or (UCaaS) that is comprised of integrated voice, text, video, data, collaboration and mobile applications. The company’s business products portfolio covers the full spectrum of business communications needs, serving single-person companies to those with thousands of employees.
GuruFocus gives Vonage a 5 of 10 financial strength rating with an interest coverage ratio of 3.99 ranking it beneath 64% of the 374 companies in the global telecom services industry. The company has an Altman Z-Score of 1.42 indicating that it is in the distress zone and could potentially file for bankruptcy within the next two years.
GuruFocus gives Vonage three severe warning signs:
- The company has a low Piotroski F-Score of 3, which usually implies poor business operations.
- The company has an operating margin that has been in a five-year decline. The average rate of decline for Vonage is -13.9% per year.
- The company also continues to issue new debt. Over the past three years, it has issued $292.255 million of new debt.
Below is a Peter Lynch chart that shows Vonage is trading above its intrinsic value
Fournier graduated with a degree in mechanical engineering in 1983 from the Wentworth Institute of Technology in Boston. After working for several years in the engineering field, Fournier decided to change directions.
In 1988, Fournier began his investment career working at Sanford C. Bernstein. He then worked in global equity investments at Appaloosa Management, where he met David Tepper (Trades, Portfolio).
In 2001, Fournier formed his own hedge fund, Pennant Capital Management. The firm currently owns 43 stocks with a total estimated value of $3.89 billion.
Disclosure: Author does not own any shares of this company.
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