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Vistaprint N.V. - A Distant Vision

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August 09, 2010 – Comments (2) | RELATED TICKERS: CMPR

We admit it, for many of you, we are about to bring back a few memories, and just maybe, create a few new ones.

How many remember the band Journey? Hmmm..that's more than we thought. Okay, how many remember the song Faithfully? Wow, we are impressed.

Imagine you and another at a Journey concert in the early 80s. Steve Perry starts to sing Faithfully. The crowd starts to lip sync with Perry and all of sudden it isn't two people lost in the music, it's one person living the music.

Who would have thought that the next 25 years would pass that fast? I know at Wax Ink, those days seemed such a short time ago.

Investing for retirement happens the same way. Before you realize it, the days have passed, and our working lives have come to an end.

For quite some time we have tried to supply investors, not the investors of Wall Street, but the blue collar investors of Main Street, with reasonably considered ideas that could be factored in to their retirement thinking.

This week's company, Vistaprint N.V., (Nasadq: VPRT) is no exception. Well, almost no exception.

The idea actually came from the Motley Fool's 11 O'Clock Stock feature, where every business day for the next 50 days, one of the Motley Fool analysts will present their stock idea for investor consideration.

Basis

Financial information related to Vistaprint N.V. contained in this report is based on the company's most recent SEC Form 10-K filing for fiscal year ending June 30, 2009, as filed with the Securities and Exchange Commission on August 31, 2009, with updates from the company's most recent SEC Form 10-Q filing, as filed with the Securities and Exchange Commission on April 30, 2010.

What They Do

The company is an on-line provider of customized marketing products and services to small businesses world wide.

They offer a broad range of complementary products and services ranging from printed business cards, brochures and post cards, to apparel, invitations, announcements, holiday cards, calendars, creative design services, copywrite services, direct mail services, promotional gifts, signage, website design, website hosting services, and e-mail marketing services.

Short-Term Investment

The stock closed recently at $32.64, with resistance at $46.60, a 43% increase from its recent close, and support at $30.33, a 7% decline from its recent close, creating a tempting proposition for short-term investors.

However, a recent announcement by the company that fourth quarter sales were below expectations sent the stock price into a downtrend, falling from a recent high of around $51 to its recent close, which is well off its March 2010 high of almost $62.

While we happen to think the recent announcement is much ado about nothing, we are reminded of the old adage that the trend is you friend.

So while we are aware of the trend, we think that with fairly tight stops under a trade, now would actually be a very good time to take a short-term position.

Long-Term (5 Year Hold) Investment
For a company with a market cap of just under $1.5 billion, we think the financials are in very good order, with low debt to equity ratios.

Additionally, the current ratio, quick ratio, and cash ratio, are all within our investment quality ranges, as are the days receivables outstanding, and the days payables outstanding, allowing the company to turn its inventory almost 32 times per year.

The one major downside, at least to us, was the free cash flow the company generated during FY10, $0.36 per share. Granted, growing annual year over year revenues at almost 30% has a tendency to eat up free cash flow.

So while we were pleased to see that year over year net income increased 19%, we think long-term investors should pay close attention, and not become so enamored with income growth that they lose track of the company's ability to grow free cash flow.

Valuations

Based on our review of the company's financial information, with emphasis on the company's FY10 data, we think a reasonable value estimate for the stock is in the $34 to $38 range.

The stock is currently trading at a 35% discount to its March 2010 highs, signaling a buying opportunity for many investors. But current price levels are placing the stock at 4 times tangible book value, which we think makes the stock a touch pricey.

Final Thoughts

We all come to a place in our lives when we realize that the years have simply passed.

Hopefully as they did pass, we have taken the time to have some fun, to enjoy whatever the work is we do, and equally important, to have wisely invested the few dollars we have managed to save.

So while thoughts of days long past may make us smile, thoughts of days yet to come, surrounded by those we have spent a lifetime caring for, should make us smile even more.

Knowing as lovers, as parents, as grandparents, and as investors, we have taken the time to consider what is truly important in life, and planned accordingly.

Wax


Worksheet
To download the Vistaprint N.V. Raw Value worksheet, please click here.

2 Comments – Post Your Own

#1) On August 09, 2010 at 7:21 AM, dragonLZ (99.33) wrote:

While we happen to think the recent announcement is much ado about nothing, we are reminded of the old adage that the trend is you friend.

So while we are aware of the trend, we think that with fairly tight stops under a trade, now would actually be a very good time to take a short-term position.

While VPRT might go up short-short-term, I'm pretty confident it's gonna have another sharp drop when it announces earnings next quarter. JMO.

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#2) On August 09, 2010 at 8:39 PM, wax (97.35) wrote:

dragonLZ;

That's the reason for the tight stops. As the price moves up you move up your stops. If the price falls more than you are comfortable with, your stops take you out.

Wax

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