Why VASCO Data Security International, Inc. Fell 22% in October

By Markets Fool.com

Image source: Getty Images.

Continue Reading Below

What happened

Shares of NASCO Data Security International (NASDAQ: VDSI) fell 21.9% in October, according to data from S&P Global Market Intelligence. The main culprit was a disappointing third-quarter earnings report.

So what

On the evening of Oct. 18, VASCO released preliminary results for the third quarter. Sales were pegged at $43 million, far below Wall Street's then-current $51 million average estimate. Management also reduced VASCO's full-year revenue guidance from $210 million to $190 million along with "lower" operating margins.

The next day, share prices plunged as much as 22% lower.

Continue Reading Below

VDSI data by YCharts.

Now what

The full third-quarter report was right in line with VASCO's preliminary release, and the stock hardly moved on the news.

Large banking customers in Europe held back on data security orders in the third quarter, adjusting to economic pressure and an urgent need to find new digital transaction and security tools. Many expected orders are now slipping into the next fiscal year or not expected to arrive at all.

There's a solid upside to the European ruckus. Those stressed-out banks may very well come back with a profound need for more and better security tools, giving VASCO a chance to win additional business in the long run. Long-term investors should take a closer look at VASCO and its security rivals, ready to pounce on the best security providers while share prices are low.

At the moment, VASCO shares are trading 28% lower over the last 52 weeks, with a 15% drop in 2016.

10 stocks we like better than VASCO Data Security International
When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*

David and Tom just revealed what they believe are the ten best stocks for investors to buy right now... and VASCO Data Security International wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of November 7, 2016

Anders Bylund has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.