OneSpan

OneSpan Inc is assigned a 3-star quantitative star rating, reflecting our opinion that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 7% discount to our quantitative fair value estimate of $19.06 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The company's profitability bolsters our valuation estimate. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's earnings yield of 7.7% ranks in the top 30% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, which contributes to our view that shares are cheap.

On a different note, the firm's valuation metrics are potentially concerning. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to market value ratio of 1.0, for example, sits in the bottom 40% compared with global peers. The market value of equity makes up a large fraction of enterprise value, indicating that shares have sharply risen, or that the company has a "lazy" balance sheet that is underleveraged. Despite our favorable price/fair value ratio, this characteristic is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.