Vasco's Growing Pains

Already jittery investors jumped ship today as Vasco Data Securities (VDSI) reported another quarter that missed analysts estimates. Is this the end of the road for VDSI? Well, let's take a look at the numbers, because after all they should mean at least something, even in a crazy market like this one.

In the full year ended December 31, 2007 Vasco’s revenues grew 58% to $120 million, from $76.1 million. Net income rose 67% in 2007 to $21 million, or 55 cents per diluted share, from $12.6 million, or 33 cents per diluted share, in 2006. Vasco Data Securities total sales for the fourth 4th quarter increased 24% to $31.2 million from $25.2 million. Maybe the most assuring statistic is that Vasco won 651 new customers. All of these statistics were within Vasco's management's projections, but still this was not what the analysts anticipated. If you step back and look at these numbers on a yearly basis, it really looks quite cheap. After all VDSI is now trading at a 21 P/E ratio.

So why did they miss? Well, a higher than expected tax rate certainly didn't help things. A tax rate of 49 percent in the 4th quarter, compared with the 28 percent reported in the previous nine months really hit the bottom line. Not only this, but management emphasized that a delay in shipments worth approximately $3.6 million have now been moved to the next quarter. Don't forget Vasco is expanding in several locations around the world, and this is impacting the bottom line as well by increasing expenses.

Still should I be sitting here defending this company after they hurt so many investors the past two quarters? This stock has been in a downward spiral since reporting it's last earnings three months ago and any new investors to this stock must be sweating bullets. Needless to say, if you didn't buy all at once this could be considered an opportunity. I personally still believe they have a lot of long-term value, and I will actually be adding to my position at these levels. Either I am just glutton for punishment, or I think the future for Vasco and online banking security still looks bright, you decide for yourself...

Get Ready For Vasco Data Securities Earnings

With earnings season in full swing one of our favorites here at Stock Picky is set to report. Vasco Data Securities (VDSI) on will report it's quarterly earnings on Thursday, February 21.

In case you haven't heard of them, Vasco is a company that designs and manufactures security tokens for online banking all around the world, but not so much here in The States just yet. Their stock has fallen from grace, and is back down to a price that I certainly find reasonable for the moment. They had a tremendous amount of backlog 33.4 million to be exact, from last quarter which should help out on the earnings release tomorrow.



During the last conference call Vasco did reaffirm their full year guidance for revenue growth, gross margins and operating margins, so things from their standpoint appear to be very healthy. The real question is will the banking crisis hurt Vasco's bottom line? A logical person would think that security for it's customers should be #1 priority, so I find it hard to believe that there will be many cutbacks from banks.

Now, like with any stock it is very easy to get burned in earnings season, ah but that is the beauty of being a long term-investor. You can put some in before earnings, and then add to your position over time. Buying on the dips and selling on the peaks if you so choose.

So is Vasco Data Securities a slam dunk? Of course not, I mean is there really any slam dunks in this market? Just remember that you need to focused on the future, and I can tell you that with Vasco's vast customer base, and growing presence around the world the future sure looks bright for this company...

Zoltek Hits A Speed Bump

Zoltek (ZOLT) reported it's earnings yesterday that dissapointed some investors. Zoltek's net sales for the quarter totaled $40.1 million, compared to $30.3 million in the first quarter of fiscal 2007 and to $43.6 million in the fourth quarter of fiscal 2007. Zoltek's net income was $2.6 million in the first quarter of fiscal 2008, which compared to net losses of $5.7 million and $1.8 million reported for the first and fourth quarters of fiscal 2007.

Zsolt Rumy, Zoltek's Chairman and Chief Executive Officer, said that although management had expected sales in the recent quarter to approximate the level reported for the immediately preceding quarter, volume was constrained by customer plant shutdowns in Europe over the holiday season and by year-end inventory adjustments by several customers who previously had built up their inventories to address concerns regarding possible shortages. "With our increasing capacity, our customers are more confident that we will be able to supply all their requirements and, consequently, they worked down some safety stocks. Overall demand for our low-cost, high-performance carbon fibers remains strong and we are optimistic that we can reach our sales objective for fiscal 2008," Rumy said.

As a long term investor you need to ask yourself if the overall story has changed. Is this just a hick-up along the way? Don't forget it was a tough quarter for a lot of companies out there with the slow down here in The States. Zoltek still has deals with the largest wind turbine manufactures in the world, and wind energy should only continue to grow in the future. Zoltek is also a smaller company which will lead to these massive stock swings in one direction or the other. Given these facts I think that this situation is presenting us with a buying opportunity.

Remember, as a long term investor you can buy a certain stock over and over again to lower your cost basis. You can always add to your position on dips in most stocks out there. These stocks that are mentioned in this blog are not 1 month stocks, they are not even 6 months stocks. Each one I plan on holding for at least a year or more depending on if the reasons I bought the stock in the first place has changed.

You need to do this same thing when you see your stock take a dive like Zoltek did today. Sometimes panic selling creates the best buying opportunities... Look at Google, it is bouncing off it's low, and should continue to rise as it has just become too cheap, especially with Microsoft's offer to buy Yahoo.

I guess it all depends if you see the glass half empty or half full...