Amid the growing and swiftly advancing technologies, software, and applications, incidents of ransomware attacks, social engineering threats, along with cloud security concerns and stronger multi-factor authentication, have grown significantly. This has resulted in an urgent need for companies to invest in robust, consistent, and secure cybersecurity solutions.
New-age cybersecurity solutions not only protect systems, networks, and programs from digital attacks but also focus on aspects like identity and access management and real-time data monitoring for early threat detection. This surge in demand and enhanced capabilities are offering lucrative opportunities for the cybersecurity market.
The global cybersecurity market is projected to grow to $562.72 billion by 2032, exhibiting growth at a CAGR of 14.3%. Additionally, the U.S. cyber security market is expected to grow significantly, reaching an estimated value of $166.73 billion in 2032, driven by the rising number of E-commerce platforms in the market.
OneSpan Inc. (OSPN) stands to benefit strongly from the current market trends. OSPN is a cybersecurity technology company which offers a cloud-based and open-architected anti-fraud platform. The company is also known for its multi-factor authentication and electronic signature software.
The cybersecurity technology provider achieved strong financial growth in the last reported quarter. Its subscription revenue rose 29% year-over-year to $33.60 million. Also, the company reported a net retention rate (NRR) of 106%.
Recently, the company introduced a breakthrough innovation in phishing-resistant transaction security, VISION FX, and delivered the most secure and user-friendly solution for banking customers. OSPN also announced new eSignature integrations, which provide insurers with a modernized and paperless experience.
OneSpan’s operational capabilities and financial performance resonate with its stock performance. Shares of OSPN surged 38.4% over the past six months and 80.3% over the past year to close its last trading session at $19.09.
Let’s look at factors that could influence OSPN’s performance in the upcoming months.
Positive Recent Developments
On November 19, 2024, OSPN announced integration with Ping Identity, a leader in securing digital identities for the world’s largest enterprises. Under the strategic partnership, Ping Identity offers OneSpan’s FIDO-enabled solutions to eliminate passwords and benefit from stronger authentication.
The collaboration expands OSPN’s operations and allows it to enhance the security landscape by delivering the most secure and user-friendly authentication solutions and protecting customers.
On November 4, 2024, OSPN introduced its new Ready for Guidewire integrations in the Guidewire Marketplace to drive cloud adoption within the P&C sector. OSPN’s cloud-native integrations with Guidewire InsuranceSuite on Guidewire Cloud offer an end-to-end digital workflow, allowing P&C insurance carriers to launch faster with reduced complexity and operational burden.
Robust Financials
OSPN reported a total revenue of $56.24 million during the third quarter that ended September 30, 2024. Its gross profit grew 2.2% from the year-ago value to $41.55 million. The company’s operating income was $11.25 million, against an operating loss of $4.79 million during the prior year’s period.
In addition, the company’s adjusted EBITDA came in at $16.73 million, up 165.3% from the prior year’s period. OSPN’s non-GAAP net income of $13.10 million or $0.33 per share indicates growth of 266.1% and 266.7% over the previous year’s quarter, respectively.
Also, OneSpan’s cash and cash equivalents stood at $77.48 million as of September 30, 2024, compared to $43 million as of December 31, 2023. A strengthened asset base may positively impact the company’s financial health and ability to pursue future growth opportunities.
Further, for the full year 2024, OSPN expects revenue in the range of $238 million to $242 million. The company projects ARR in the range of $166 million to $170 million. The company revised its adjusted EBITDA to $65 million - $67 million, compared to its previous guidance range of $55 million to $59 million.
Favorable Analyst Estimates
Analysts expect OSPN’s EPS for the fourth quarter (ended December 2024) to increase 34.2% year-over-year to $0.26. The consensus revenue is expected to be $58.37 million for the same quarter. Furthermore, the company has surpassed the consensus revenue and EPS estimates in all of the trailing four quarters, which is impressive.
Additionally, Street expects the company’s revenue and EPS for the fiscal year 2025 to increase 3.4% and 5.2% year-over-year to $248.51 million and $1.38, respectively.
High Profitability
OSPN’s trailing-12-month gross profit margin of 71.14% is 41% higher than the industry average of 50.47%. Its trailing-12-month EBIT margin of 18.15% is significantly higher than the industry average of 5.41%. Also, the stock’s net income margin of 11.73% is 216.4% above the 3.71% industry average.
Furthermore, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 15.45%, 14.37%, and 9.93% favorably compares to the industry averages of 4.28%, 3.12%, and 2.09%, respectively. Similarly, its trailing-12-month Levered FCF margin of 14.56% is 27.5% higher than the industry average of 11.42%.
Discounted Valuation
In terms of forward non-GAAP P/E, OSPN is currently trading at 14.57x, 44.4% lower than the industry average of 26.20x. Further, the stock’s forward EV/Sales and EV/EBITDA of 2.73x and 9.92x are considerably lower than the industry averages of 3.40x and 16.11x, respectively.
Additionally, the stock’s forward Price/Sales of 3.02x is 9.5% lower than the industry average of 3.33x.
POWR Ratings Reflect Promise
OSPN’s solid fundamentals are reflected in its POWR Ratings. The stock has an overall rating of A, translating to a Strong Buy in our proprietary system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. OSPN has an A grade for Value, which is consistent with its lower valuation.
Also, the stock has a B grade for Quality, in sync with its higher-than-industry profitability.
OSPN is ranked #2 in the 20-stock A-rated Software - Security industry.
Beyond what I have stated above, we have also given OSPN grades for Sentiment, Momentum, Growth, and Stability. Get access to all the OSPN Ratings here.
Bottom Line
OSPN reported impressive financial results in the last reported quarter, beating top and bottom-line analyst expectations. Also, analysts appear bullish about the company’s future prospects, driven by robust demand for cybersecurity solutions, the company’s diverse product range, strong market position, and strategic partnerships.
Moreover, the demand for solutions to prevent and combat cyberattacks and threats is increasing rapidly, which will further grow the demand for OSPN’s products.
Given OSPN’s solid financials, accelerating profitability, and promising growth outlook, this stock could be an ideal buy now.
How Does OneSpan Inc. (OSPN) Stack Up Against Its Peers?
While OSPN has an overall POWR Rating of A, investors could also check out these other stocks within the A-rated Software - Security industry with A (Strong Buy) or B (Buy) ratings: Radware Ltd. (RDWR), Trend Micro Incorporated (TMICY), and Darktrace PLC ADR (DRKTY).
For exploring more A and B-rated software stocks, click here.
What To Do Next?
Get your hands on this special report with 3 low priced companies with tremendous upside potential even in today’s volatile markets:
3 Stocks to DOUBLE This Year >
OSPN shares were trading at $19.13 per share on Thursday afternoon, up $0.04 (+0.21%). Year-to-date, OSPN has gained 3.18%, versus a 3.77% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
Is OneSpan (OSPN) a Cybersecurity Stock to Watch? StockNews.com
