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) surged nearly 14% at the open on Tuesday morning after the company reported its fourth-quarter earnings. Within an hour, the stock collapsed, falling more than 11% below the previous day's close. As of noon, the stock had recovered from this drop, up slightly from the previous close.
So what: VASCO reported 44% year-over-year revenue growth for the fourth quarter, with revenue of $62.4 million easily beating analyst estimates of $54 million. Non-GAAP EPS nearly tripled year-over-year to $0.32, besting analyst estimates by twelve cents.
For the full year, VASCO recorded $201.5 million in revenue, up 30% compared to 2013, and $0.98 in non-GAAP EPS, up from just $0.40 in 2013. The company has guided for revenue in 2015 to be in the range of $220 million to $230 million, and for the adjusted operating margin to be between 17% and 20%.
Now what: Shares of VASCO nearly quadrupled in 2014, and the stock now trades at a lofty six times sales and nearly 30 times earnings. While growth in 2014 was strong, the company suffered revenue and earnings declines in both 2012 and 2013, and while the company has been profitable in each of the past 10 years, operating margins have been erratic.
VASCO's earnings results were unambiguously positive, but the market's machinations, sending the stock up, then down, then up again, all by noon, could be the result of both a high valuation and uncertainly over whether the positive results will prove sustainable. VASCO's guidance in the past has missed the mark, with revenue coming in well below the company's expectations in both 2012 and 2013. Investors considering any stock should never take management's predictions as fact.