VASCO Data Security International, Inc. (VDSI)

HLChin (93.37) Submitted: 1/01/08 3:10 PM : Start Price: $28.30 VDSI Score: -27.06

There has been a recent pullback for Vasco has lowered the price of the stock to a more digestable level.

In Asia, Vasco seems to have caught wildfire by being rolled out at notable banks like DBS, OCBC and HSBC. The simple dual authentication system is proving to be a simple yet effective way to limit (note limit) online theft. I sincerely believe that there is much more value in executing simple security steps well rather than having sophisticated but unusable or unpractical implementations.

Because Vasco is only in an early stage of growth, I expect Vasco to be able to keep analyst projections of 36% for the next one to two year at least. I would check back after that.

To expect Vasco to growth it's earnings by 36% for the next five years (analyst estimates) would be quite a feat. Not that it's not achievable, but rather it would take a hell of a lot more effort and quite different from expecting a growth of additional USD 6-10m in earnings next year.

There is some solace in the lightweight model with not much capital investments and an insider ownership of 25% from the owner (very cool).

I love it when owners have a big stake in early growth companies.

If Vasco keeps this growth rate of 36%, then we can expect a 30% per year return from here so long as the growth holds. A 30% growth rate would mean about 22% returns per year.

Meanwhile, I will set the clock to review in the next year.

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