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At US$234, Is It Time To Put VeriSign, Inc. (NASDAQ:VRSN) On Your Watch List?

VeriSign, Inc. (NASDAQ:VRSN) saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. But what if there is still an opportunity to buy? Let’s examine VeriSign’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

View our latest analysis for VeriSign

What's the opportunity in VeriSign?

VeriSign appears to be expensive according to my price multiple model, which makes a comparison between the company's price-to-earnings ratio and the industry average. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 42.27x is currently well-above the industry average of 35.42x, meaning that it is trading at a more expensive price relative to its peers. Another thing to keep in mind is that VeriSign’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards the levels of its industry peers over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard for it to fall back down into an attractive buying range again.

What does the future of VeriSign look like?

earnings-and-revenue-growth
earnings-and-revenue-growth

Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. VeriSign's earnings over the next few years are expected to increase by 26%, indicating a highly optimistic future ahead. This should lead to more robust cash flows, feeding into a higher share value.

What this means for you:

Are you a shareholder? VRSN’s optimistic future growth appears to have been factored into the current share price, with shares trading above industry price multiples. At this current price, shareholders may be asking a different question – should I sell? If you believe VRSN should trade below its current price, selling high and buying it back up again when its price falls towards the industry PE ratio can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.

Are you a potential investor? If you’ve been keeping tabs on VRSN for some time, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for VRSN, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.

If you'd like to know more about VeriSign as a business, it's important to be aware of any risks it's facing. Every company has risks, and we've spotted 3 warning signs for VeriSign (of which 1 is significant!) you should know about.

If you are no longer interested in VeriSign, you can use our free platform to see our list of over 50 other stocks with a high growth potential.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.

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