Is VeriSign Fairly Priced After Strong Multi Year Share Price Gains?

How Has VeriSign's Share Price Been Performing?

VeriSign's share price has delivered solid returns for long term investors, but the recent pattern is a mix of strong longer term gains and softer near term momentum. Over the past year, the stock is up 27.4%, and it has returned 21.2% per year on average over three years and 14.9% per year over five years, while year to date it is still ahead by 19.2%.

In the shorter term, however, performance has been more muted, with the share price roughly flat over the last week, up just 0.1%, and down 2.1% over the past month. This kind of pause after a strong multi year run can signal a cooling of enthusiasm, a reassessment of risk, or simply investors waiting for the next catalyst.

Because VeriSign operates in a relatively niche but critical part of the internet infrastructure ecosystem, the stock often moves on shifts in sentiment about long term demand for domain names and digital security rather than on daily headlines. That makes it especially important to look beneath the surface of recent returns and understand whether the current price fairly reflects its future cash flows and competitive position.

With the shares trading around recent highs yet taking a short term breather, investors are right to ask whether they are paying up for quality or stepping into a stock that could be fully priced. To answer that, the next sections will break down VeriSign's valuation through several lenses, from cash flows to market multiples, before circling back to a more holistic way of thinking about what the market might be missing.

VeriSign delivered 27.4% returns over the last year. See how this stacks up to the rest of the IT industry.

Approach 1: VeriSign Discounted Cash Flow (DCF) Analysis

A Discounted Cash Flow model estimates what a business is worth today by projecting its future cash flows and then discounting them back into present dollar terms. For VeriSign, the 2 Stage Free Cash Flow to Equity model starts with last twelve months free cash flow of about $998 Million and assumes steady growth in coming years.

Analysts see free cash flow rising to roughly $1.16 Billion by 2026, with further increases extrapolated over the following decade, reaching about $1.82 Billion by 2035. Simply Wall St discounts each of these projected cash flows back to today, all in $, to arrive at an estimated intrinsic value of $242.63 per share.

Compared with the current market price, this DCF suggests VeriSign is about 0.7% overvalued, which is effectively a rounding error in valuation terms. In other words, the market price and the model’s estimate of fair value are very closely aligned.

Result: ABOUT RIGHT

VeriSign is fairly valued according to our Discounted Cash Flow (DCF), but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for VeriSign.

Approach 2: VeriSign Price vs Earnings

For profitable, mature businesses like VeriSign, the price to earnings, or PE, ratio is a useful way to judge whether investors are paying a reasonable price for each dollar of current profits. In general, faster growth and lower perceived risk justify a higher PE, while slower growth and higher uncertainty tend to pull a fair PE lower.

VeriSign currently trades on a PE of about 27.9x, which is slightly below the broader IT industry average of roughly 29.9x and well below the peer group average of around 42.0x. On the surface, that suggests the market is not overpaying relative to similar companies.

Simply Wall St goes a step further with its Fair Ratio, an estimate of what PE VeriSign should trade on given its earnings growth outlook, profitability, size and risk profile. For VeriSign, this Fair Ratio is 29.0x, just above the current multiple. Because this measure is tailored to the company rather than relying only on rough peer and industry comparisons, it provides a more precise valuation anchor, and the closeness of the two figures points to a stock that is priced quite efficiently.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your VeriSign Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you attach your own story about VeriSign’s future to concrete forecasts for its revenue, earnings, margins and ultimately a Fair Value estimate. You can then compare that Fair Value with today’s share price to decide whether to buy, hold or sell. The whole picture updates dynamically when new information like earnings or news arrives. For example, a bullish investor might build a narrative where improving domain trends and .web potential justify a Fair Value closer to the higher end of recent targets around $340. A more cautious investor could instead create a narrative that emphasizes risks around parked domain monetization and promotional domains, supporting a Fair Value nearer $250. This makes it easy to see how different perspectives translate into different price targets and action plans, all within an accessible, story driven framework that is used by millions of investors.

Do you think there's more to the story for VeriSign? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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