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Summary

  • The company blew through Q2 earnings estimates, with shares spiking 15% in a single day.
  • This confirms our thesis that VASCO is a great long-term growth story.
  • We felt VASCO had a big opportunity to break into the cloud security space, and it looks like it's making headway in the area, per Q2 earnings.

VASCO Data Security International (NASDAQ:VDSI) has seen its shares soar 22% over the last month. This comes as its earnings beat consensus handily for Q2. EPS came in at $0.21 (versus $0.13 consensus), and revenues were $47.65 (beating $41.4 million consensus). VASCO also upped its full-year 2014 guidance. Wall Street now has 2014 EPS coming in at $0.54, compared to previous consensus of $0.49 from just a week ago.

The company saw improvement in Q2 2014 (compared to Q2 2013) for revenues and margins. This comes as the company is making headway with its development complete security services, including its most recent focus of risk-based authentication solutions. Just last quarter, it acquired Risk IDS Ltd., which is a risk-based authentication solution provider to the banking industry.

Since our initial article back in October, shares are now up nearly 90%. The stock has blown through our price target, but could still be offering value. It trades at 21x forward earnings, which is below our target 30x multiple from our initial article. As we noted in our October article:

While the company earlier in the month announced that revenues and operating income were likely to disappoint for the rest of the year, we see the long-term story as still intact. The company appears to be at an inflection point; it's making the shift from being a software security firm for the banking and financial sector to a company that can better meet the needs of businesses across all markets.

Source: Update: VASCO Data Security International Earnings