Up-and-coming data security specialist VASCO Data Security International (Nasdaq: VDSI) will report fourth-quarter earnings Thursday morning. Is this an exciting investment opportunity or an overpriced hype machine? Let's find out together.

What Fools say:
Here's how VASCO's CAPS score rates against some of its peers and competitors.

Market Cap (Millions)

Trailing P/E Ratio

CAPS Rating

EMC (NYSE: EMC)

$32,481

20.1

*****

Check Point Software Technologies (Nasdaq: CHKP)

$4,778

17.5

****

VASCO

$651

28.6

*****

Secure Computing (Nasdaq: SCUR)

$572

N/A

*****

Aladdin Knowledge Systems (Nasdaq: ALDN)

$315

21.0

****

Data taken from Motley Fool CAPS on 2/18/08.

Oh, my! The four largest information-security companies include two Foolish newsletter picks and rate an average of 4.75 CAPS stars. Why is this sector so steamin' hot?

All-Star CAPS player Onestroke calls VASCO a no-brainer, because it offers "much needed security in today's information age. Good for the long haul." The bears tend to glorify the competition rather than vilify VASCO itself, an argument that's akin to calling the company a laggard only among superior peers.

What management does:
If competitors are doing better than this, they surely deserve all the kudos they get. But nobody can match this combination of growth and efficiency:

Margins

6/06

9/06

12/06

3/07

6/07

9/07

Gross

64.3%

66%

68%

67.3%

66.8%

66.5%

Operating

21.5%

23.4%

24.9%

25.8%

27.5%

27.7%

Net

14.2%

15.3%

16.5%

18.5%

19.7%

20%

FCF/Revenue

7.6%

16.5%

9.7%

11.9%

18.5%

18.7%

Y-O-Y Growth

6/06

9/06

12/06

3/07

6/07

9/07

Revenue

55.6%

47.6%

39.4%

56.2%

63%

66.6%

Earnings

89.5%

99%

63.4%

119.5%

126.6%

118%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
For my money, it's either a growth opportunity like VMware (NYSE: VMW), or a buyout candidate of TIBCO's (Nasdaq: TIBX) caliber. Either way, there should be substantial rewards ahead for those who buy in at today's ridiculously low prices. A price-to-earnings ratio of less than 30 looks miserly next to the growth figures above.

For an in-depth analysis of VASCO, pick up a free 30-day Stock Advisor trial and read the original newsletter recommendation. Secure Computing is a Motley Fool Rule Breakers recommendation.

Fool contributor Anders Bylund holds no position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure is the Punxsutawney Phil of financial forecasting.