What investors should perhaps keep an eye on is its profit margin, which recently went down to 1.49% in the first quarter from 4.95% in the same period last year. This is happening in light of a huge leap in the debt-equity ratio from 0.58 in the quarter ending December to roughly 0.99 in the latest quarter. Nevertheless, the strong growth performance and huge prospects are very encouraging. With the energy industry booming, the company with its long tradition of providing diverse infrastructural services is a good pick. In terms of pricing, its P/E ratio is roughly at the same level as that for the industry. But if one takes growth into account, its PEG ratio of 0.65 is way below the industry’s 1.30, which means it is relatively priced at a lower level.
VeriSign: Impressive revenue performance and profitability
The rule to evaluating a company with value is simple – growth and profitability. It is ideal to see a company raking in consistently growing revenues and have the machinery to turn it into profits. The quarterly revenue growth year-on-year of Verisign, Inc. (NASDAQ:VRSN), one of Berkshire Hathaway Inc. (NYSE:BRK.A)’s big buys, remains steadfast in the low-end double-digits since 2010, the most recent of which is 14.93% for the first quarter of 2013, while its competitors experienced a contraction in revenues. Moreover, the company’s profitability is undeniable. You won’t see many companies that have the ability to convert over a third of its revenues into profits. Verisign, Inc. (NASDAQ:VRSN) has been excellent in managing its costs with a consistently high net profit margin of above 30% in the past couple of years. Its operating margin at 54% is way above the industry’s 12% based on Yahoo compilations. Consequently, VeriSign had surpassed at least the last four EPS estimates. And the EPS growth is not about to taper off yet, it is expected to grow in the next five years by 13.5% on average.
But why is Verisign, Inc. (NASDAQ:VRSN) such an attractive investment? It is its business. This monopoly provides Internet infrastructure services. It is the business behind the domain names .com, .gov, and .edu, among others. It is almost impossible to think of the Internet without these. Moreover, Verisign, Inc. (NASDAQ:VRSN)’s sphere is broad and therefore, it is not that vulnerable to domestic economic shocks. Currently, its valuation (P/E ratio is 21.92) is at a lower level compared to the application software industry’s (PE of 26). With a forward P/E that is even lower at 17.89, there is a notable room for appreciation that investors can take advantage of.
Conclusion
Famous hedge funds’ big buys are almost always likened to maps of hidden treasures – they point you where to look. But it pays to check the portfolio based on current metrics prior to any investment decision as the 13F filings do not reflect the latest information. I invite investors to check out these stocks. This set provides a balanced mix of great performing stocks that you can consider for long-term investments.
Aubrey Tabuga has no position in any stocks mentioned. The Motley Fool recommends Wells Fargo & Co (NYSE:WFC). The Motley Fool owns shares of Wells Fargo & Co (NYSE:WFC).
The article A Quick Look at Berkshire Hathaway’s Big Buys in 1Q13 originally appeared on Fool.com.
Aubrey is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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