OneSpan Inc (NASDAQ:OSPN) Fits Peter Lynch’s GARP Strategy with Strong Growth and Financial Stability

Peter Lynch’s investment strategy centers on finding companies with steady growth at fair prices, commonly known as the Growth at a Reasonable Price (GARP) method. His approach highlights strong fundamentals, earnings potential, and financial stability while steering clear of growth rates that might not last. Key factors include a 5-year EPS growth between 15% and 30%, a PEG ratio under 1, minimal debt (Debt/Equity < 0.6), good liquidity (Current Ratio ≥ 1), and a high Return on Equity (ROE > 15%). These measures help investors locate businesses growing consistently without being too expensive or carrying too much debt.

OneSpan Inc (NASDAQ:OSPN) stands out as a potential match for Lynch’s strategy. The firm, which focuses on digital security and authentication, shows a mix of reliable earnings, financial strength, and fair pricing, making it worth a closer look for those investing long-term.

Why OneSpan Meets the Peter Lynch Standards

• Steady Growth: OneSpan’s 5-year EPS growth of 19.39% fits Lynch’s target range (15%-30%), showing consistent progress without excessive risk. The company’s recent earnings jump (150.94% YoY) is impressive, but investors should evaluate whether this trend can continue.
• Fair Pricing (PEG Ratio): With a PEG ratio of 0.58, well below Lynch’s limit of 1, OSPN seems priced lower than its growth potential, suggesting the market may not fully recognize its earnings capacity.
• High Profitability (ROE): A 25.15% ROE surpasses Lynch’s 15% minimum, showing effective use of investor funds. Additionally, a strong Return on Invested Capital (ROIC: 16.41%) and healthy profit margins (24.05%) confirm its ability to produce earnings efficiently.
• Financial Stability: OneSpan has no debt, a rare advantage that matches Lynch’s liking for financially cautious firms. Its Current Ratio of 1.96 also signals enough liquidity to cover short-term needs.

Key Strengths and Points to Watch

Our fundamental analysis report gives OSPN a score of 6/10, noting its earnings power and financial condition as major positives. The company performs well on margins (Operating Margin: 21.20%) and valuation, trading at a P/E of 11.17—lower than 90.75% of its software industry peers. However, revenue growth has been slow (-0.26% YoY), and future EPS growth is expected to drop to 4.37%, which requires attention.

Why This Is Important for GARP Investors

Lynch’s method favors businesses that are easy to grasp, financially secure, and fairly valued—traits that lower risk while enabling steady returns. OneSpan’s role in cybersecurity (a sector with growth potential) and its solid financial position make it a candidate for deeper study, though investors should determine if its recent earnings surge is sustainable.

For more stocks that fit the Peter Lynch screen, check the full results here.

Disclaimer: This article is not investment advice. Conduct your own research or consult a financial advisor before making investment decisions.