OneSpan Inc. (OSPN) and its subsidiaries create, develop, and sell digital solutions globally for identification, security, and business productivity. While its shares are down 52.1% over the past year, the company expects its full-year 2022 sales to meet or surpass the prior-year sales. OSPN intends to enhance its investments in the second half of 2022 to help accelerate revenue growth starting in 2023. Adjusted EBITDA is estimated to be in the $5 million to $7 million range for the full year 2022 and anticipates ARR growth of 16% to 18% for fiscal 2022.
In terms of forward EV/Sales, the stock is currently trading at 1.73x, 38.2% lower than the industry average of 2.80x. Also, its forward Price/Sales of 2.23x is 19.4% lower than the industry average of 2.77x. Moreover, OSPN’s trailing-12-months Price/Book of 2.15x is 31.6% lower than the industry average of 3.15x.
Currently, the stock looks extremely oversold, however, given its robust growth prospects and various strategic initiatives to boost its operational efficiencies, OSPN could witness solid momentum in the near term.
Here’s what could shape OSPN’s performance in the near term:
In February, OSPN and Smart Communications, a leading technology company focused on assisting businesses in engaging in more meaningful customer conversations, announced a partnership integrating OneSpan’s e-signature product, OneSpan Sign, into the Smart Communications platform to extend the value of the total customer experience. This integration enhances the client experience while also increasing operational efficiency. Joint customers get improved customer satisfaction and increased application completions, reducing time to revenue while showing compliance by simplifying digital agreement procedures.
During the first quarter ended March 31, 2022, OSPN’s total revenue increased 3.3% year-over-year to $52.45 million. Its operating expenses declined 5.5% from the year-ago value to $15.77 million. Its operating loss narrowed slightly year-over-year to $9.24 million. The company’s net income came in at $5.21 million compared to a net loss of $9.15 million in the prior-year quarter. Its EPS amounted to $0.13.
Impressive Growth Prospects
Street expects OSPN’s revenues and EPS to rise 6.8% and 110% year-over-year to $230.3 million and $0.01, respectively, in fiscal 2023. In addition, OSPN’s EPS is expected to rise at a 2% CAGR over the next five years. Moreover, the company has an impressive earnings surprise history, as it topped Street EPS estimates in three of the trailing four quarters.
POWR Ratings Reflect Solid Prospects
OSPN has an overall grade of B, equating to a Buy rating in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight different categories. OSPN has a B grade for Quality and Value. OSPN’s solid earnings and revenue growth potential is consistent with the Quality grade. In addition, the company’s lower-than-industry multiples are in sync with the Value grade.
Of the 30 stocks in the F-rated Software – Security industry, OSPN is ranked #1.
Beyond what I stated above, we have graded OSPN for Sentiment, Stability, Growth, and Momentum. Get all OSPN ratings here.
OSPN has exhibited robust financial performance in the last reported quarter and is on track to deliver solid growth in the coming months based on its strategic collaborations. In addition, given that the stock is currently trading under the oversold territory, it may be an opportune time for investors to scoop up its shares and cash in on its favorable growth attributes.
How Does OneSpan Inc. (OSPN) Stack Up Against its Peers?
OSPN has an overall POWR Rating of B, which equates to a Buy rating. This rating is superior to its peers within the same industry, such as NortonLifeLock Inc. (NLOK), Fortinet Inc. (FTNT), and Proofpoint Inc. (PFPT), which all are rated C (neutral).
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OSPN shares were unchanged in premarket trading Monday. Year-to-date, OSPN has declined -28.94%, versus a -17.04% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...
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