1 Less Reason to Believe in Vonage Holdings Stock

Vonage Holdings stock is down more than 2% since CEO Marc Lefar announced plans to retire after his replacement is found. He may be leaving at just the right time, Fool contributor Tim Beyers says in the following video.

Lefar deserves credit for keeping Vonage relevant in an increasingly competitive market. Indeed, the company has earned profits in each of the past three fiscal years despite declining revenues. Improving gross margins are the likely catalyst.

Yet in most other areas, Vonage's key indicators are trending poorly. Returns on capital have declined in each of the past three years and now sit at just 7.8%, down from 31% in 2011. Cash flow from operations is down sharply over the same period, leading the company to take on more debt.

There's also increasing competition to consider. Microsoft recently bulked up Skype with a new broadcast-ready version while Google continues to offer free and quite usable voice and video over IP with Google Plus. Add it up, Tim says, and there's no reason to believe new management will produce the sorts of returns for shareholders that Lefar did. (Up more than 160% since joining Vonage as CEO in late July 2008.)

Now it's your turn to weigh in. Do you believe Vonage can overcome competition and deliver value to shareholders? Why or why not? Please watch the video to get the full story, and then leave a comment to let us know your take, including whether you would buy, sell, or short Vonage Holdings stock at current prices.

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The article 1 Less Reason to Believe in Vonage Holdings Stock originally appeared on Fool.com.

Tim Beyers is a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission. He owned shares of Google (classes A and C) at the time of publication. Check out Tim's Web home and portfolio holdings, or connect with him on Google+Tumblr, or Twitter, where he goes by @milehighfool. You can also get his insights delivered directly to your RSS reader.The Motley Fool recommends Google (classes A and C) and owns shares of Google (classes A and C) and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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