Back to top

Image: Bigstock

VeriSign, Inc. (VRSN) Hits Fresh High: Is There Still Room to Run?

Read MoreHide Full Article

Shares of VeriSign (VRSN - Free Report) have been strong performers lately, with the stock up 4.5% over the past month. The stock hit a new 52-week high of $227.84 in the previous session. VeriSign has gained 10.7% since the start of the year compared to the 27.1% move for the Zacks Computer and Technology sector and the 15.5% return for the Zacks Internet - Software and Services industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on April 27, 2023, VeriSign reported EPS of $1.7 versus consensus estimate of $1.64.

For the current fiscal year, VeriSign is expected to post earnings of $6.92 per share on $1.49 billion in revenues. This represents a 10.9% change in EPS on a 4.88% change in revenues. For the next fiscal year, the company is expected to earn $7.68 per share on $1.62 billion in revenues. This represents a year-over-year change of 10.98% and 8.54%, respectively.

Valuation Metrics

VeriSign may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

VeriSign has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 32.9X current fiscal year EPS estimates, which is a premium to the peer industry average of 29X. On a trailing cash flow basis, the stock currently trades at 33.5X versus its peer group's average of 21.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, VeriSign currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if VeriSign fits the bill. Thus, it seems as though VeriSign shares could have potential in the weeks and months to come.

See More Zacks Research for These Tickers

Normally $25 each - click below to receive one report FREE:

VeriSign, Inc. (VRSN) - free report >>

Published in