OneSpan (OSPN): Is the Dip a Buying Opportunity Amid Quantum-Resistant Growth?

The stock market's relentless focus on short-term performance often obscures long-term value creation. OneSpan (OSPN), a provider of identity and digital transaction security solutions, currently trades at a Forward P/E of 11.36—a steep discount to its Software - Infrastructure peers, which average 28.14. This valuation gap, coupled with its strategic pivot to quantum-resistant encryption and improving recurring revenue streams, positions OneSpan as a contrarian buy for investors with a multi-year horizon.

Valuation: A Discounted Growth Story

OneSpan's Forward P/E of 累.36—down from 13.63 in December 2024—reflects a market skeptical of its near-term growth. However, this metric understates its long-term potential. Analysts project a 11.7% EPS growth in 2026, which, if realized, would push its forward multiple to 12.5—still well below its sector.

The company's Trailing P/E (TTM) of 10.76 further underscores its affordability, while its Price/Sales ratio of 2.47 and Price/Book of 2.56 signal undervaluation across multiple metrics. Even its Zacks Rank of #2 (Buy), though neutral relative to its peers, aligns with the bullish case for a stock trading at a fraction of its growth potential.

Recent Performance: Navigating Short-Term Headwinds

OneSpan's Q1 2025 results highlight a mixed but improving trajectory:
- Revenue dipped 2% YoY to $63.4M, but subscription revenue rose 9% to $43.6M, driving ARR growth to $168.4M (up 9% YoY).
- Operating income surged 22% to $17.2M, reflecting cost discipline, while net income rose 8% to $14.5M.
- Adjusted EBITDA hit $23M, up 14% YoY, signaling strong cash flow generation.

The company's $105.2M cash balance and $0.12 quarterly dividend reinforce financial stability. While EPS for Q1 was $0.37, down slightly from estimates due to one-time costs, the beat on revenue and margin expansion suggests management's focus on profitability is paying off.

Strategic Positioning: Quantum-Resistant Encryption as a Growth Catalyst

OneSpan's Quantum-Safe Encryption (QSE) platform is its crown jewel. As quantum computing threatens to break existing encryption standards, companies and governments are racing to adopt solutions like OneSpan's, which offers post-quantum cryptographic algorithms compliant with NIST standards.

The company's $168.4M ARR—with a 107% net retention rate—hints at customer stickiness as it integrates QSE into its enterprise security stack. Partnerships with financial institutions and healthcare providers, which rely on irrefutable digital transactions, position OneSpan to capitalize on a $12B cybersecurity market expected to grow at 10% annually through 2030.

Risks and Considerations

• Near-Term Earnings Volatility: While Q1 beat revenue estimates, the EPS miss highlights execution risks.
• Industry Competition: Rivals like Thales and Entrust offer competing encryption tools, though OneSpan's quantum focus may carve a niche.
• Regulatory Uncertainty: The timeline for quantum-resistant standards (e.g., NIST's 2024-2026 timeline) could delay adoption.

Investment Thesis: A Long-Term Play on Cybersecurity's Next Frontier

OneSpan's valuation is a contrarian gift. At 11x forward earnings, it trades at a discount even as it executes on its quantum-resistant roadmap and grows recurring revenue. The Zacks #2 Buy rating and improving fundamentals suggest the market has yet to price in its strategic moat.

Historical backtests reveal that short-term strategies tied to earnings announcements have underperformed. A buy-and-hold approach over 30 days following earnings since 2020 resulted in a maximum drawdown of -42.97%, underscoring the necessity of a long-term perspective to capture OneSpan's growth potential.

For investors:
- Buy: Accumulate shares on dips below $15, targeting a $20 price target by 2026 if earnings estimates hold.
- Hold: For those seeking steady dividends (yielding ~0.8%) and exposure to cybersecurity's quantum leap.

Conclusion

OneSpan's dip is a strategic entry point for investors willing to look beyond short-term noise. Its discounted valuation, quantum-resistant differentiation, and sticky ARR growth make it a compelling long-term bet. As enterprises brace for the quantum era, OneSpan is poised to emerge as a leader—justifying a Buy rating with a multi-year horizon.

Disclosure: This article is for informational purposes only and should not be construed as financial advice. Always conduct your own research or consult a financial advisor before making investment decisions.