Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of VASCO Data Security International (NASDAQ:OSPN) are trading 13% higher this afternoon after the company reported strong first-quarter results and increased estimates for full-year sales in its core segments.
So what: VASCO's first-quarter revenue of $38.8 million was a 10% year-over-year improvement on the last March quarter, and adjusted earnings of $0.09 per share from continuing operations represented a big 46% year-over-year improvement -- final GAAP EPS was also $0.09, a 29% year-over-year increase. Both figures smoked Wall Street's analysts, who had projected $36.3 million in revenue and a mere $0.04 in EPS for the quarter. Vasco now expects to generate between $168 million to $172 million in revenue from its traditional businesses for 2014 -- which excludes new DIGIPASS service offerings -- up from the prior revenue guidance range of $160 million to $165 million for the year. Analysts had expected only $160.8 million for 2014, so this is undoubtedly good news.
Now what: VASCO had been suffering declining core metrics for a while prior to this report, as its trailing-12-month EPS was a third lower, and its trailing-12-month free cash flow two-thirds lower, than it had been five years ago. Effectively, all of the company's share-price gains of recent years have been valuation driven, as the company started 2013 with a P/E of roughly 20 compared to today's 33 P/E. Today's double beat is good news, but it doesn't mean that VASCO has become a screaming buy just yet, either.