A First Look at VeriSign (VRSN)

A friend asked me to take a look at VeriSign (VRSN).  This stock has paid some recent special dividends that were quite high yielders.  For those of you who are not familiar with VeriSign here is what the company does to earn money:

VeriSign, Inc. is a provider of Internet infrastructure services. It provides domain name registry services and infrastructure assurance services. Its business consists of Naming Services segment, which consists of Registry Services and Network Intelligence and Availability (NIA) Services. Registry Services operates the authoritative directory of all .com, .net, .cc, .tv, and .name domain names and the back-end systems for all .jobs and .edu domain names. NIA Services provides infrastructure assurance to organizations and is consisted of VeriSign iDefense Security Intelligence Services, Managed Domain Name System Services and Distributed Denial of Service mitigation. On August 9, 2010, it sold its Authentication Services business, which included Business Authentication Services, User Authentication Services and its investment in VeriSign Japan K.K. In November 2010, it ceased the operations of its Content Portal Services business.

VeriSign (VRSN)

Market price: $29.99

Image002

Link to the chart: http://stockcharts.com/h-sc/ui?s=VRSN&p=W&b=5&g=0&id=p95244304300

Shares: 166.40 million

Market capitalization: $4.99 billion

Dividend record: Some hefty special dividends in the past 18 months; no quarterly dividend

Dividends:          $3.00 (8.79% yield) December 16th, 2010

                        $2.75 (7.93% yield) May 5th, 2011

                        $3.00 (8.78% yield) December 20th, 2011

Earning power: $1.12 per share five year average adjusted EPS @ 166.40 million shares

(Earnings adjusted for changes in capitalization)

            EPS                   Net inc.             Adj. EPS

2006     $1.53                $383 M              $2.30

2007     ($0.63)             ($149 M)           ($0.90)

2008     ($1.87)             ($374 M)           ($2.25)

2009     $1.28                $246 M              $1.48

2010     $4.64                $831 M              $4.99

Five year average adjusted EPS was $1.12 per share

Consider buying VRSN below $13.44 per share (12 times average earnings)

Consider selling VRSN above $22.40 per share (20 time average earnings)

VRSN is trading at 26.77 times average earnings.  That pricing is speculative.

Balance sheet: That is a hideous balance sheet that shows no pattern of growing equity!

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Book value per share: $3.13

Price to book value ratio: 9.58 (BAD)

Current ratio: 2.34 (GOOD) Current assets exceeds current liabilities by more than double.

Quick ratio: 2.16 (GOOD) Current cash exceeds current liabilities by more than double.

Disclosure: I don’t own VeriSign (VRSN).  I wouldn’t consider buying it above $13.44 per share.

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Published in: on August 3, 2011 at 2:43 pm  Leave a Comment  

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