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VeriSign

Nasdaq:VRSN
Snowflake Description

Questionable track record with worrying balance sheet.

The Snowflake is generated from 30 checks in 5 different areas, read more below.
VRSN
Nasdaq
$11B
Market Cap
  1. Home
  2. US
  3. Software
2017/12/16
Company description

VeriSign, Inc. provides domain name registry services and Internet security worldwide. More info.


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3 Month History
VRSN
Industry
5yr Volatility vs Market

Value

 Is VeriSign undervalued based on future cash flows and its price relative to the stock market?

Value is all about what a company is worth versus what price it is available for. If you went into a grocery store and all the bananas were on sale at half price, they could be considered undervalued.
INTRINSIC VALUE BASED ON FUTURE CASH FLOWS
Here we compare the current share price of VeriSign to its discounted cash flow analysis.value.

The discounted cash flow value is simply looking at what the company is worth today, based on estimates of how much money it is expected to make in the future.

How is this discounted cash flow calculated?

  • The current share price of VeriSign is above its future cash flow value.
Often investors are willing to pay a premium for a company that has a high dividend or the potential for future growth.
PRICE RELATIVE TO MARKET
We can also value a company based on what the stock market is willing to pay for it. This is similar to the price of fruit (e.g. Mangoes or Avocados) increasing when they are out of season, or how much your home is worth.

The amount the stock market is willing to pay for VeriSign's earnings, growth and assets is considered below, and whether this is a fair price.
Price based on past earnings
Are VeriSign's earnings available for a low price, and how does this compare to other companies in the same industry?
  • VeriSign is overvalued based on earnings compared to the US Internet industry average.
  • VeriSign is overvalued based on earnings compared to the US market.
Price based on expected Growth
Does VeriSign's expected growth come at a high price?
  • VeriSign is poor value based on expected growth next year.
Price based on value of assets
What value do investors place on VeriSign's assets?
  • VeriSign has negative assets, we can't compare the value of its assets to the US Internet industry average.
X
Value checks
We assess VeriSign's value by looking at:
  1. Is the discounted cash flow value less than 20%, or 40% of the share price? (2 checks) ( Click here or on bar chart for details of DCF calculation. )
  2. Is the PE ratio less than the market average, and/ or less than the Internet industry average (and greater than 0)? (2 checks)
  3. Is the PEG ratio within a reasonable range (0 to 1)? (1 check)
  4. Is the PB ratio less than the Internet industry average (and greater than 0)? (1 check)
  5. VeriSign has a total score of 0/6, see the detailed checks below.

    Note: We use GAAP Earnings per Share in all our calculations including PE and PEG Ratio.
    Note 2: PEG ratio is based on analysts EPS growth expectations in 1 year (-11.4%).

    Full details on the Value part of the Simply Wall St company analysis model.
X
Discounted cash flow (2 Stage Free Cash Flow to Equity)

The calculations below outline how an intrinsic value for VeriSign is arrived at by discounting future cash flows to their present value. We use analyst's estimates of cash flows going forward 5 years.

See our documentation to learn about this calculation.

5 year cash flow forecast

Present value of next 5 years cash flows:
$2,899

Terminal Value

Terminal Value = FCF2021 × (1 + g) ÷ (Discount Rate – g)

Terminal Value = $929 × (1 + 2.47%) ÷ (11.01% – 2.47%)

Terminal value based on the Perpetuity Method where growth (g) = 2.47%:
$11,146

Present value of terminal value:
$6,613

Equity Value

Equity Value (Total value) = Present value of next 5 years cash flows + terminal value
$9,512 = $2,899 + $6,613

Value = Total value / Shares Outstanding ($9,512 / 99)

Discount to Share Price

Value per share:
$96.5

Current discount (share price of $115.03): -19.21%



Estimate of Discount Rate

The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.

Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)

Discount rate = 11.01% = 2.47% + (1.134 * 7.53%)



Estimate of Bottom Up Beta

The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value ($11,250,791,442).

Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))

1.134 = 0.995 (1 + (1- 35%) (21.39%))

Levered Beta used in calculation = 1.134



Assumptions
  1. The risk free rate of 2.47% is from the 10 year government bond rate in USD.
  2. The bottom-up beta is estimated by analysing other companies in the same industry.
  3. The Equity Risk Premium is calculated by subtracting the risk free rate from the market return premium (7.53%) (source: Buffet).
  4. The dividend discount model is automatically used for companies in the following industries: Banks, Insurance, Real Estate Investment Trusts (REITs), Diversified Financial Services and Capital Markets.

Future Performance

 How is VeriSign expected to perform in the next 1 to 3 years based on estimates from 4 analysts?

The future performance of a company is measured in the same way as past performance, by looking at estimated growth and how much profit it is expected to make.

Future estimates come from professional analysts. Just like forecasting the weather, they don’t always get it right!
Annual Growth Rate
3%
Expected annual growth in earnings.
Earnings growth vs Low Risk Savings
Is VeriSign expected to grow at an attractive rate?
  • VeriSign's earnings growth is positive but not above the low risk savings rate of 4.5%.
Growth vs Market Checks
  • VeriSign's earnings growth is positive but not above the US market average.
  • VeriSign's revenue growth is positive but not above the US market average.
Annual Growth Rates Comparison
Analysts growth expectations
Super high growth metrics
High Growth Checks
  • VeriSign's earnings are expected to grow by 3% yearly, however this is not considered high growth (20% yearly).
  • VeriSign's revenue is expected to grow by 3.9% yearly, however this is not considered high growth (20% yearly).
Past and Future Earnings per Share
The accuracy of the analysts who estimate the future performance data can be gauged below. We look back 3 years and see if they were any good at predicting what actually occurred. We also show the highest and lowest estimates looking forward to see if there is a wide range.
Performance in 3 years
In the same way as past performance we look at the future estimated return (profit) compared to the available funds. We do this looking forward 3 years.
  • No +3 year Return on Equity (ROE) data.

Improvement & Relative to industry
  • No +3 year Return on Equity (ROE) or industry average data.
  • No +3 year Return on Equity (ROE) data.
X
Future performance checks
We assess VeriSign's future performance by looking at:
  1. Is the annual earnings growth rate expected to beat the low risk savings rate, plus a premium to keep pace with inflation?
  2. Is the annual earnings growth rate expected to beat the average growth rate in earnings of the US market? (1 check)
  3. Is the annual revenue growth rate expected to beat the average growth rate in revenue of the US market? (1 check)
  4. Is the annual earnings growth rate expected to be above 20%? (1 check)
  5. Is the annual revenue growth rate expected to be above 20%? (1 check)
  6. Is the Return on Equity in 3 years expected to be over 20%? (1 check)
Some of the above checks will fail if the company is expected to be loss making in the relevant year.
VeriSign has a total score of 0/6, see the detailed checks below.

Note 1: We use GAAP Net Income Excluding Exceptional Items for our Earnings in all our calculations.

Full details on the Future part of the Simply Wall St company analysis model.

Past Performance

  How has VeriSign performed over the past 5 years?

The past performance of a company can be measured by how much growth it has experienced and how much profit it makes relative to the funds and assets it has available.
Past earnings growth
Below we compare VeriSign's growth in the last year to its industry (Internet).
Past Earnings growth analysis
We also check if the company has grown in the past 5 years, and whether it has maintained that growth in the year.
  • VeriSign's year on year earnings growth rate has been positive on average over the past 5 years.
  • VeriSign's 1 year earnings growth is less than its 5 year annual average (5.3% vs 16.7%)
  • VeriSign's earnings growth has not matched the US Internet industry average in the past year (5.3% vs 7.4%).
Earnings and Revenue History
VeriSign's revenue and profit over the past 5 years is shown below, any years where they have experienced a loss will show up in red.
Performance last year
We want to ensure a company is making the most of what it has available. This is done by comparing the return (profit) to a company's available funds, assets and capital.
  • VeriSign has negative shareholder equity (liabilities exceed assets), therefore its ROE is meaningless.
  • VeriSign performed above the US Internet industry average based on Return on Assets (ROA) last year.
  • Performance based on Return on Capital Employed (ROCE) has been diminishing over 3 years.
X
Past performance checks
We assess VeriSign's performance over the past 5 years by checking for:
  1. Has earnings increased in past 5 years? (1 check)
  2. Has the earnings growth in the last year exceeded that of the Internet industry? (1 check)
  3. Is the recent earnings growth over the last year higher than the average annual growth over the past 5 years? (1 check)
  4. Is the Return on Equity (ROE) higher than 20%? (1 check)
  5. Is the Return on Assets (ROA) above industry average? (1 check)
  6. Has the Return on Capital Employed (ROCE) increased from 3 years ago? (1 check)
The above checks will fail if the company has reported a loss in the most recent earnings report. Some checks require at least 3 or 5 years worth of data.
VeriSign has a total score of 2/6, see the detailed checks below.

Note: We use GAAP Net Income excluding extraordinary items in all our calculations.

Full details on the Past part of the Simply Wall St company analysis model.

Health

 How is VeriSign's financial health and their level of debt?

A company's financial position is much like your own financial position, it includes everything you own (assets) and owe (liabilities).

The boxes below represent the relative size of what makes up VeriSign's finances.

The net worth of a company is the difference between its assets and liabilities.
Net Worth
  • VeriSign is able to meet its short term (1 year) commitments with its holdings of cash and other short term assets.
  • VeriSign's long term commitments exceed its cash and other short term assets.
Balance sheet
This treemap shows a more detailed breakdown of VeriSign's finances. If any of them are yellow this indicates they may be out of proportion and red means they relate to one of the checks below.
Assets
Liabilities and shares
The 'shares' portion represents any funds contributed by the owners (shareholders) and any profits.
  • Low level of unsold assets.
  • VeriSign has negative shareholder equity (liabilities exceed assets).
Historical Debt
Nearly all companies have debt. Debt in itself isn’t bad, however if the debt is too high, or the company can’t afford to pay the interest on its debts this may have impacts in the future.

The graphic below shows equity (available funds) and debt, we ideally want to see the red area (debt) decreasing.

If there is any debt we look at the companies capability to repay it, and whether the level has increased over the past 5 years.
  • VeriSign has negative shareholder equity (liabilities exceed assets).
  • VeriSign has negative shareholder equity (liabilities exceed assets).
  • VeriSign has negative shareholder equity (liabilities exceed assets).
  • VeriSign has negative shareholder equity (liabilities exceed assets).
X
Financial health checks
We assess VeriSign's financial health by checking for:
  1. Are short term assets greater than short term liabilities? (1 check)
  2. Are short term assets greater than long term liabilities? (1 check)
  3. Has the debt to equity ratio increased in the past 5 years? (1 check)
  4. Is the debt to equity ratio over 40%? (1 check)
  5. Is the debt covered by short term assets? (1 check)
  6. Are earnings greater than 5x the interest on debt (if company pays interest at all)? (1 check)
  7. VeriSign has a total score of 1/6, see the detailed checks below.


Full details on the Health part of the Simply Wall St company analysis model.

Dividends

 What is VeriSign's current dividend yield, its reliability and sustainability?

Dividends are regular cash payments to you from the company, similar to a bank paying you interest on a savings account.
Annual Dividend Income
Dividend payments
0%
Current annual income from VeriSign dividends.
If you bought $2,000 of VeriSign shares you are expected to receive $0 in your first year as a dividend.
Dividend Amount
Here we look how much dividend is being paid, if any. Is it above what you can get in a savings account? It is up there with the best dividend paying companies?
  • Not paying a dividend.
  • Not paying a dividend.
Annualized Historical and Future Dividends
It is important to see if the dividend for a company is stable, and not wildly increasing/decreasing each year. This graph shows you the historical rate to count toward your assessment of the stock.

We also check to see if the dividend has increased in the past 10 years.
  • Not paying a notable dividend.
  • Not paying a notable dividend.
Current Payout to shareholders
What portion of VeriSign's earnings are paid to the shareholders as a dividend.
  • Not paying a notable dividend.
Future Payout to shareholders
  • Insufficient estimate data to determine if a dividend will be paid in 3 years.
X
Income/ dividend checks
We assess VeriSign's dividend by checking for:
  1. Firstly is the company paying a notable dividend (greater than 0.5%) - if not then the rest of the checks are ignored.
  2. Current dividend yield, is there one at all, is it higher than the low risk savings rate, and is it above the top 25% of dividend payers? (2 checks)
  3. Have they paid a dividend for 10 years, and during this period has the dividend been volatile (drop of more than 25%)? (1 check)
  4. If they have paid a dividend for 10 years has it increased in this time? (1 check)
  5. How sustainable is the dividend, can VeriSign afford to pay it from its earnings today and in 3 years (Payout ratio less than 90%)? (2 checks)
  6. VeriSign has a total score of 0/6, see the detailed checks below.


Full details on the Dividends part of the Simply Wall St company analysis model.

Management

 What is the CEO of VeriSign's salary, the management and board of directors tenure and is there insider trading?

Management is one of the most important areas of a company. We look at unreasonable CEO compensation, how long the team and board of directors have been around for and insider trading.
CEO
Jim Bidzos, image provided by Google.
Jim Bidzos
COMPENSATION $10,700,372
AGE 62
TENURE AS CEO 6.3 years
CEO Bio

Mr. D. James Bidzos, also known as Jim, is the Founder of VeriSign, Inc. and has been its Executive Chairman since August 17, 2009 and also its Chief Executive Officer and President since August 1, 2011. Mr. Bidzos served as the Interim Chief Executive Officer of VeriSign, Inc. from July 2008 to August 2009 and its Interim President from July 2008 to January 14, 2009. He served as an Executive Vice President of RSA Security LLC from July 1996 to February 1999 and later served as its President and Chief Executive Officer. He served as President and Chief Executive Officer of RSA Data Security from 1986 to February 1999. He served as Interim President of VeriSign, Inc. from July 2008 to January 14, 2009. Mr. Bidzos has been the Chairman of the Board at inCompass Wireless, Inc. since 2007. He served as the Executive Chairman of VeriSign, Inc. from August 21, 2007 to January 2009 and its Interim Chairman of VeriSign, Inc. since June 2008 to August 2009 and previously also served as its Chairman from April 1995 to December 2001 and Vice Chairman from December 2001 to July 2007. He served as Vice Chairman of RSA Security, from March 1999 to May 2002. He has been a Director of VeriSign, Inc. since April 1995. He served as a Director of Trintech Group plc since February 1999. Mr. Bidzos has served as a director of VeriSign Japan K.K. since March 2008 and served as Representative Director of VeriSign Japan K.K. from March 2008 to September 2008.

CEO Compensation
  • Jim's compensation has been consistent with company performance over the past year.
  • Jim's compensation is higher than average for a company of this size and profit level.
Management Team Tenure

Average tenure and age of the VeriSign management team in years:

3.7
Average Tenure
56.5
Average Age
  • The tenure for the VeriSign management team is about average.
Management Team

Jim Bidzos

TITLE
Founder
COMPENSATION
$11M
AGE
62
TENURE
6.3 yrs

George Kilguss

TITLE
Executive VP & CFO
COMPENSATION
$4M
AGE
56
TENURE
5.6 yrs

Todd Strubbe

TITLE
Executive VP & COO
COMPENSATION
$4M
AGE
54
TENURE
2.7 yrs

Tom Indelicarto

TITLE
Executive VP
COMPENSATION
$3M
AGE
53
TENURE
3.1 yrs

Burt Kaliski

TITLE
Senior VP & CTO

Scott Schnell

TITLE
Senior Vice President of Global Marketing & Channel Management
AGE
59

Pat Kane

TITLE
Senior Vice President of Naming & Directory Services
COMPENSATION
$2M
AGE
55

Danny McPherson

TITLE
Senior VP & Chief Security Officer

Dave Pool

TITLE
Senior Vice President of Technology Services

Ebrahim Keshavarz

TITLE
Senior Vice President of Product Management
TENURE
0.9 yrs
Board of Directors Tenure

Average tenure and age of the VeriSign board of directors in years:

7.3
Average Tenure
66.9
Average Age
  • The tenure for the VeriSign board of directors is about average.
Board of Directors

Timothy Tomlinson

TITLE
Independent Director
COMPENSATION
$360K
AGE
67
TENURE
10.1 yrs

Jim Bidzos

TITLE
Founder
COMPENSATION
$11M
AGE
62
TENURE
8.3 yrs

Lou Simpson

TITLE
Lead Independent Director
COMPENSATION
$355K
AGE
81
TENURE
2.4 yrs

Kath Cote

TITLE
Independent Director
COMPENSATION
$330K
AGE
68
TENURE
9.8 yrs

Roger Moore

TITLE
Independent Director
COMPENSATION
$331K
AGE
75
TENURE
15.8 yrs

Jamie Gorelick

TITLE
Independent Director
COMPENSATION
$320K
AGE
66
TENURE
2.9 yrs

Tommy Frist

TITLE
Independent Director
COMPENSATION
$300K
AGE
49
TENURE
2 yrs
Recent Insider Trading
  • No 3 month insider trading information.
Who owns this company?
X
Management checks
We assess VeriSign's management by checking for:
  1. Is the CEO's compensation unreasonable compared to market cap and profit (greater than 0.5% of the company's profit + 0.03% of market cap)? (1 check)
  2. Has the CEO's compensation increased more than 20% whilst the EPS is down more then 20%? (1 check)
  3. Is the average tenure of the management team less than 2 years? (1 check)
  4. Is the average tenure of the board of directors team less than 3 years? (1 check)
  5. VeriSign has a total score of 0/6, this is not included on the snowflake, see the detailed checks below.


Note: We use the top 6 management executives and board members in our calculations.

Note 2: Insider trading include any internal stakeholders and these transactions .

Full details on the Management part of the Simply Wall St company analysis model.

Company News

Company Info

Map
Description

VeriSign, Inc. provides domain name registry services and Internet security worldwide. The company offers registry services that operate the authoritative directory of .com, .net, .cc, .tv, and .name domain names, as well as the back-end systems for .gov, .jobs, .edu, and other domain names. Its registry services allow individuals and organizations to establish their online identities. The company also provides infrastructure assurance services consisting of distributed denial of service protection services, Verisign iDefense security intelligence services, and managed domain name system services. It serves financial institutions, software-as-a-service providers, e-commerce providers, and media companies, as well as governmental and quasi-governmental organizations through direct sales and indirect channels. VeriSign, Inc. was founded in 1995 and is headquartered in Reston, Virginia.

Details
Name: VeriSign, Inc.
Ticker: VRSN
Exchange: NasdaqGS
Founded: 1995
Market Cap: $11,250,791,442
Shares outstanding: 98,570,102
Website: http://www.verisign.com
Address: VeriSign, Inc.
12061 Bluemont Way,
Reston,
Virginia, 20190,
United States
Listings
Exchange Symbol Ticker Symbol Security Exchange Country Currency Listed on
NasdaqGS VRSN Common Stock Nasdaq Global Select US USD 30. Jan 1998
DB VRS Common Stock Deutsche Boerse AG DE EUR 30. Jan 1998
Number of employees
Current staff
Staff numbers
990
VeriSign employees.
Industry
Industry: Internet Software and Services
Sector: Software