Stamps.com Inc. (NDAQ:STMP) shares hit a two year low recently prompting at least one investor to speak out against the company. LaGrange Capital disclosed a 6 percent stake in the company and demanded that the company immediately institute a share buyback program and work on improving its financial condition or put the company in the hands of someone who can!

La Grange said that it feels Stamps.com offers a highly competitive product and below market prices while maintaining key barriers to entry. The company also has a subscriber-based model capable of generating substantial recurring cash flows. In fact, management has stated that the lifetime value of each customer is 2x the subscriber acquisition cost - a great ROI for any industry! However, the hedge fund is disappointed with the disconnect between potential and actual performance.

Stamps.com needs to revive its earnings and subscriber growth rates in order to regain the confidence of shareholders. Backing out interest income and fully taxing earnings, the company generated a mere $0.07 in non-GAAP EPS - a decline from last year. Moreover, the new direct marketing campaign generated only 2,000 net paying subscriber adds with the total number of subscribers below the prior year's quarter and only marginally higher than the last quarter.

One of the key suggestions made by LaGrange was a share buyback program that would repurchase 1/3 of the company's outstanding shares. The hedge fund insists that such a program would involve minimal financial risk given the fact that the company has no debt and a substantial pile of cash. LaGrange also recommended that the company pursue strategic partnerships and alliances to drive subscriber growth, which is key to profitability. If the company isn't capable of delivering on results, it should consider a sale of the company to a more capable group.

In the end, Stamps.com is an extremely undervalued business with poor management that is unable to deliver results. And with the company trading at a two year low, many shareholders are ready for change. Obviously, any share buyback or sale of the company should dramatically help unlock shareholder value, which makes STMP a stock worth watching!

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