VeriSign, Inc.

Date: April 06, 2024.

Company’s Overview

VeriSign (VRSN), the internet’s backbone, operates globally, ensuring smooth digital interactions. They manage critical internet infrastructure, including the registries for the .com, .net, and other essential top-level domains (TLDs). Additionally, they offer cybersecurity solutions to safeguard businesses online. Think of them as the guardians keeping the internet’s address system and online security running smoothly.

Competition

Revenue Segments

The Company’s net sales proportions by segment for the most recent quarterly report are composed by:

Related Risks

Geopolitical instability or conflicts could disrupt internet infrastructure, impacting VeriSign’s operations. While they’re a leader in domain name registries, new players or alternative domain systems could emerge as competition. Being a crucial part of the internet’s infrastructure makes VeriSign a prime target for cyberattacks, which could disrupt their services or compromise sensitive data.

Changes in regulations regarding domain names or internet governance could also impact their business model. Economic downturns might lead businesses to cut back on domain registrations or cybersecurity solutions, affecting their revenue. Finally, new technologies could disrupt the domain name system entirely, potentially rendering VeriSign’s current solutions obsolete.

Financial Analysis

Company’s Revenues

Revenues from 2021 to 2023:

• VeriSign annual revenue for 2023 was $1.493B, a 4.79% increase from 2022.
• VeriSign annual revenue for 2022 was $1.425B, a 7.33% increase from 2021.
• VeriSign annual revenue for 2021 was $1.328B, a 4.94% increase from 2020.

The yearly revenue from 2010 till 2023 is:

**The 2024 and 2025 values are the expected by the analysts

Company’s Net Income

Net Income from 2021 to 2023:

• VeriSign annual net income for 2023 was $0.818B, a 21.34% increase from 2022.
• VeriSign annual net income for 2022 was $0.674B, a 14.14% decline from 2021.
• VeriSign annual net income for 2021 was $0.785B, a 3.69% decline from 2020.

The yearly net income from 2010 till 2023 is:

**The 2024 and 2025 values are the expected by the analysts

Company’s EPS

EPS from 2021 to 2023:

• VeriSign 2023 annual EPS was $7.9, a 26.6% increase from 2022.
• VeriSign 2022 annual EPS was $6.24, a 10.86% decline from 2021.
• VeriSign 2021 annual EPS was $7, a 0.99% decline from 2020.

Company’s Free Cash Flow

Free Cash Flow from 2021 to 2023:

• VeriSign annual free cash flow for 2023 was $0.808B, a 0.54% increase from 2022.
• VeriSign annual free cash flow for 2022 was $0.804B, a 6.56% increase from 2021.
• VeriSign annual free cash flow for 2021 was $0.754B, a 9.81% increase from 2020.

The yearly free cash flow from 2010 till 2023 is:

**The 2024 and 2025 values are the expected by the analysts

Shares Outstanding

Effective July 27, 2023, the Company’s Board authorised the repurchase of its common stock in the amount of $1.14 billion, in addition to the $356.1 million that remained available for repurchases under the share repurchase program, for a total repurchase authorisation of up to $1.50 billion under the program.

Asset/Liabilities & Current Ratio

Unveiling VeriSign’s financial health reveals a company with a concerning balance sheet. The rock-bottom asset-to-liability ratio of 0.53 indicates their debts (liabilities) are nearly double their assets. This weak financial position raises a red flag, as it limits their ability to invest in growth initiatives, weather economic downturns, or absorb unexpected financial blows.

The current ratio of 0.83 offers also a negative sign. This metric measures a company’s ability to meet short-term obligations (debts due within a year) using short-term assets (cash, receivables). While exceeding 1 is ideal, a ratio of 0.83 suggests VeriSign might barely cover their immediate financial commitments in the near term. This lack of a significant buffer could cause liquidity issues if they face cash flow problems.

Valuation

Based on the DFC analysis, VRSN’s fair price is $143, showing its current price is overvalued. Note that in the analysis we take into consideration also the cash and cash equivalents and the total debt.

The company has received a range of ratings from buy to sell. Specifically, there were 1 buy, 2 hold and 1 underweight ratings. The consensus rating leans toward overweight.

VeriSign presents a curious case for investors. On the bright side, they boast impressive financial performance with a solid track record. Over the past decade, they’ve delivered consistent revenue growth (10-year CAGR of 4.46%) and healthy earnings per share growth (10-year EPS CAGR of 5.51%).

Furthermore, their return on invested capital (ROIC) of nearly 48% signifies exceptional efficiency in generating profits from their investments. Additionally, they’ve been shareholder-friendly, consistently reducing outstanding shares by 37% since 2011, and their gross profit margin has soared to an impressive 86.8%.

However, a major concern lies in their financial strength. The asset-to-liability ratio of 0.53, coupled with $1.8 billion in senior notes, indicates a company heavily reliant on debt. This translates to limited financial flexibility and vulnerability during economic downturns. The current ratio of 0.83 further emphasises their tightrope walk, with barely enough resources to cover short-term obligations. To add to this, their stock price might be currently inflated.

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Disclaimer

Please note that I am not a licensed financial advisor and the information provided here should not be construed as financial advice. I am simply sharing my understanding of the topics based on my research and personal experiences. It is always advisable to consult with a qualified financial advisor before making any investment decisions.

The information I provide is based on publicly available sources and my own interpretations. I strive to provide accurate and up-to-date information, but I cannot guarantee the correctness or completeness of the information.

Any opinions expressed here are my own and do not necessarily reflect the views of any other individual or organisation.

Please use your own judgement and conduct your own research before making any investment decisions.