Vistaprint Captures Thrifty Small Biz Market

Crista Huff
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Posted: Nov 27, 2011 12:26 AM

As a small business owner, I earn money in three distinctly different industries, and as a fiscal conservative, I’m extremely careful with money. I started these businesses with a $700 loan from my personal checking account to my business checking account, and paid that back rather quickly. I carry no business debt, and in fact, do not own a business credit card.  It’s hard enough earning enough money to live on: I don’t need debt payments cutting into my cash flow.

I buy products and services only on an as-needed basis, ask friends for extra stuff like computers and printers, set aside a large percentage of revenues for income taxes, and concentrate my expenditures primarily on marketing, e.g. website and business cards.  And like hundreds of thousands of small business people around the world, I am a very satisfied customer of Vistaprint N.V. (VPRT, $31.00), a rapidly growing company which supplies online graphic design services and customized printed products to customers in 120 countries around the world.

“The Company offers a range of products and services ranging from printed business cards, brochures and post cards to apparel, invitations and announcements, holiday cards, calendars, creative design services, copywriting services, direct mail services, promotional gifts, signage, Website design and hosting services, and e-mail marketing services. The Company has automated and integrated the design and production process, from design conceptualization to product shipment and service delivery.” — Morgan Stanley Research 2011

Vistaprint’s 3-year projected consensus earnings (EPS) growth is 47.8%. That includes a drop in 2012 EPS forecasts, and then resumed growth in FYs 2013 and 2014. In July 2011, “VPRT announced a bold plan to accelerate spending to spur growth over a 5-year horizon, and cautioned that expansion costs are likely to limit near-term earnings potential.” — Standard & Poors Research

“We believe in the company’s focus of high volume batch processing, and are supportive of management’s decision to invest in improving the company’s ‘customer centricity.’ ” — Morgan Stanley Research, Oct. 28, 2011.

As of its fiscal year ended June 2011, VPRT had $240 million of cash and marketable securities on hand, and no long-term debt.  Revenues were $817 million in 2011. VPRT does not pay a dividend. The price earnings ratio (PE) is 17.2 based on projected FY 2012 earnings of $1.80 per share.

The company serviced 41,000 orders per day in FY2009 and 52,000 orders per day in FY2011. Vistaprint also has printing service partnerships with 1600 Staples and 1600 FedEx Kinkos stores.

VPRT is a volatile small-cap stock. Its share price fell in half in 2008, 2010 and 2011, generally recovering within six months of each drop, although it has yet to recover from the most recent share price drop in July 2011, when it announced its 5-year plan of capital expenditures to generate additional long-term sales and revenue growth.

The current trading range is $26 – $45. A trader or medium-term investor would do well to purchase the stock under $32 and then put in a sell order at $44.  There will be enough resistance in the mid-$40's that the stock will be stuck there for a while, possibly falling back down toward $36.

This stock is too volatile for a low-risk stock investor, or an investor who agonizes over daily price movements.  But there’s plenty of room in the trading range for an experienced, less emotional investor to make money, barring unforeseen stock market or intra-company problems.

As always, readers should consult their investment and tax advisors to determine suitability, risk and taxation.