Is VeriSign an Outperform?

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With shares of VeriSign (NASDAQ:VRSN) trading at around $45.80, is VRSN an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock’s Movement

VeriSign provides Internet infrastructure services to various networks around the world. We’ll delve deeper into this in a moment. In the meantime, it’s important to note a few recent developments. One, Warren Buffet’s Berkshire Hathaway Inc. (BRK-B) opened a new position in the stock, purchasing 3.7 million shares. This fact alone is should give investors plenty of optimism for the future. Two, VeriSign has a greater amount of cash as a percentage of its assets than Apple Inc. (NASDAQ:AAPL), at 74 percent. This allows for many possibilities, which include reinvestments in the business, acquisitions, and returning capital to shareholders. Three, a five-year restructuring plan has recently been completed, making VeriSign leaner and meaner. Employees have been drastically cut from approximately 5,000 to just over 1,000.

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VeriSign reported Q4 results several weeks ago. All the numbers were impressive Q4 diluted EPS came in at $0.64. Q4 revenue was $230 million. Both were significant improvements year-over-year (as you will see in the Earnings section.) FY2012 diluted EPS came in at $1.95 on revenue of $874 million. Once again, both were significant improvements. In this case, they were improvements over FY2011.

VeriSign is a premier provider of registry services. VeriSign has the exclusive rights to manage .com, .net, .cc, .tv, .name, .gov, .jobs, and .edu domains over long-term contracts. Then there’s VeriSign iDefense, which is a 24/7 accurate and actionable cyber intelligence related to vulnerabilities, malicious code, and global threats. With the world becoming more connected online by the day, online threats are ever-increasing. These threats include malware, hackers, online fraud, identity theft, cybercrime, data loss, cyber espionage, and cyber terrorism. These threats have the potential to greatly impact a company’s productivity, revenue, and identity. iDefene has hundreds of analysts and vulnerability researchers that understand international risks and threats. Threats are then thwarted.

So far, everything about VeriSign looks good, but let’s take a look at some important numbers prior to forming an opinion on the stock.

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