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Vistaprint Upgraded to Strong Buy

Zacks Equity Research

On Feb 4, Zacks Investment Research upgraded business services provider Vistaprint N.V. (VPRT) to a Zacks Rank #1 (Strong Buy) largely on the back of impressive second quarter fiscal 2014 results. The stock is currently trading at a forward P/E of 23.4x and has long-term earnings growth expectation of 23.3%.

Why the Upgrade?

Solidly executing on its operational plans, Vistaprint recorded a healthy year-over-year increase in revenue and earnings in the last reported quarter. Net income for second quarter fiscal 2014 almost doubled to $40.9 million from $23.0 million in the year-earlier quarter. On a per share basis, earnings for second quarter fiscal 2014 were $1.18 compared with 66 cents in the year-ago quarter.

Total revenue in second quarter fiscal 2014 increased 6.5% year over year to $370.8 million. The year-over-year increase in revenues was primarily attributable to a strong holiday performance across the globe with continued improvements in customer engagements.

Vistaprint’s business is scalable and the increased top line will likely result in margin expansion in the long run. The company’s web presence and online tools for customer use are well established. While additional demand would result in various capital investments such as additional printing presses, these fixed costs would be spread over a wider revenue base. The company has historically displayed strong fundamentals, which we expect will continue going forward.

Additionally, the company expects mid-teen revenue growth in North America in the near term. The company has been making efforts to stabilize the business conditions in Europe through better pricing, advertising and product quality. Vistaprint expects capital expenditures in the range of $80 million to $90 million in fiscal 2014, which will be primarily utilized to support the growth of its business.

The company is also making healthy progress with investments in new markets and the business strategy is now focused on higher quality products and delivery, increased customer service and more transparent pricing, which is designed to promote long-term customer relationships. All these initiatives augur well for the growth prospects of the company over the long haul.

Estimate Revisions

Over the last 7 days, most of the earnings estimates for fiscal 2014 were revised upward and we anticipate an uptrend for the stock backed by its strong growth potential. The current Zacks Consensus Estimate for fiscal 2014 is pegged at $2.01, which represents 67.8% year-over-year growth.

Other Stocks to Consider

Besides Vistaprint, stocks that look promising and are worth considering now include Broadridge Financial Solutions, Inc. (BR), Huron Consulting Group Inc. (HURN) and Paychex, Inc. (PAYX), each carrying a Zacks Rank #2 (Buy).

Read the Full Research Report on BR
Read the Full Research Report on PAYX
Read the Full Research Report on VPRT
Read the Full Research Report on HURN

Zacks Investment Research