Investopedia: VeriFone Makes Its Skeptics Pay

As I have said more than once, there is nothing more dangerous than trying to apply conservative valuation principles to the popular stock of a fast-growing company. VeriFone (NYSE:PAY) is a good example, as this well-run financial services company continues to find lucrative expansion opportunities and validate a premium valuation. 

First Quarter Growth Continues Apace
VeriFone's fiscal first quarter was a story about a strong company getting stronger. Revenue rose 27% from last year's level and 3% sequentially. Interestingly, the company's business was strongest in its largest (and most developed) market, as sales in U.S./Canada rose 43%, while sales in Asia rose 12%.

The company also continues to leverage its revenue growth into better profitability. Gross margin expanded by about two points from the year-ago level whether one looks at GAAP or non-GAAP numbers. While VeriFone is not holding back from spending more on R&D and sales/marketing, the company nevertheless delivered 82% operating profit growth, or 48% growth for those who prefer the non-GAAP numbers. While some may think it is worth noting that the company reported less operating cash flow than net income this quarter, quarter-to-quarter cash flow analysis often causes more problems than it solves. 


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