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.
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.