Several subscribers have asked about our thoughts on FTGX’s latest earnings report. In short, the report almost exactly matched our forecasts for the company. Our estimates for 20%+ top-line growth and the potential for nearly 50%+ EBITDA growth in 2008 remain intact. In other words, FTGX’s business fundamentals are extremely strong and the company continues to benefit from a robust industry environment.

The issue, of course, for investors is whether the stock price already reflects these improving results. As always, it’s difficult to answer that question, which is why “The Market” is so difficult to forecast. What is clear is that the stock is nowhere near as cheap as it was when we first recommended it. However, it is also true that the company is still valued at a substantial discount to its peers. Relative valuation, though, is always tricky, because you need to consider the option that the comps (i.e. EQIX, SDXC etc.) themselves are significantly overvalued.

In sum, our best guess is that at the current price levels, FTGX’s risk/reward seems about even based on a strictly rational analysis. However, there is always more to a stock price than just fundamentals. In the case of FTGX, since only one analyst on Wall Street currently covers the company, we still believe the stock is somewhat undiscovered and the supply/demand for the shares is still very favorable. Furthermore, it’s conceivable that analysts could justify a much higher EBITDA multiple on the stock given the company’s growth relative to peers, thereby greatly increasing the target price on the stock. And while we do not recommend betting your money on the potential for hyped-up price targets, the prospect of such an outcome here has us holding onto our shares for now, especially considering our continued belief that the downside here is somewhat limited given FTGX’s takeover potential.

Note: We own shares in FTGX, and first recommended them to paid subscribers at $4.30 per share. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise. Furthermore, we maintain no responsibility to update our report on FTGX or inform you of our position in the stock at any time in the future.