OneSpan Inc (NASDAQ:OSPN) Passes Key Peter Lynch GARP Filters

For investors looking for a disciplined, long-term way to build wealth, few strategies are as respected as Peter Lynch’s method. The famous manager of Fidelity’s Magellan Fund supported investing in what you understand and concentrating on companies with good fundamentals, fair prices, and lasting growth, a philosophy often called Growth at a Reasonable Price (GARP). Lynch’s filters look for companies with strong profitability, good financial condition, and a share price that is not too high for future potential. One company that recently appeared using such a filter is OneSpan Inc (NASDAQ:OSPN), a business that provides digital security and e-signature solutions.

A Peter Lynch Framework: The Core Criteria

Peter Lynch’s strategy is made to find companies that are growing profitably but are not too popular or priced too high. The aim is to find "tenbaggers"—stocks that can grow ten times in value—by concentrating on lasting business models before they are widely known on Wall Street. The exact number-based filters used to find these candidates usually include:

• Sustainable Earnings Growth: Lynch wanted a 5-year earnings per share (EPS) growth between 15% and 30%. Growth over 30% was seen as possibly not lasting, while growth under 15% might not provide enough reward.
• Fair Valuation via PEG Ratio: The Price/Earnings to Growth (PEG) ratio should be at or under 1. This measure is key because it examines if the stock’s price is fair compared to its earnings growth rate.
• Strong Profitability: A Return on Equity (ROE) over 15% shows management is creating profits from shareholder money effectively.
• Financial Condition: A Debt/Equity ratio under 0.6 (Lynch liked under 0.25) and a Current Ratio over 1 make sure the company does not have too much debt and can pay its near-term bills.

How OneSpan Matches the Lynch Model

A detailed examination of OneSpan’s fundamentals shows a picture that matches well with many of these important ideas, especially highlighting value and financial soundness.

Valuation and Growth Balance The main part of Lynch’s valuation test is the PEG ratio. OneSpan’s PEG ratio, using its last five years of earnings growth, is about 0.49. This is much lower than Lynch’s limit of 1, suggesting the market might be setting too low a price on the company’s past growth path. This low PEG ratio is backed by a simple Price-to-Earnings (P/E) ratio of 9.56, which is low compared to both the software industry average and the wider S&P 500.

Past Growth Picture OneSpan’s 5-year EPS growth rate is 19.39%. This fits perfectly inside Lynch’s preferred 15-30% range, pointing to a history of good, but not extreme, earnings increase. It shows the company has managed to grow shareholder earnings at a good pace over a medium-term length, a positive beginning for more study.

Profitability and Financial Strength The company performs well on profitability measures Lynch liked. An ROE of 24.4% is much higher than the 15% minimum, showing good use of investor money. Maybe most notable is the company’s balance sheet soundness. OneSpan has no debt, giving a Debt/Equity ratio of 0.0. This outstanding financial situation provides great operating freedom and lowers risk, a trait Lynch thought was important. Also, its Current Ratio of 1.75 shows more than enough cash to cover near-term debts.

Fundamental Condition Review: A Summary

A look at OneSpan’s detailed fundamental report supports this analysis. The report gives the stock a good total rating, with special high marks in Profitability and Valuation. Its margins are very good compared to industry competitors, and its valuation numbers are regularly seen as low. The Health score is also high, supported by the no-debt status and a good Altman-Z score showing low bankruptcy risk. The main area for care is Growth; while past EPS growth is high, recent revenue patterns have been unchanged, and future EPS growth predictions are average. For an investor inspired by Lynch, this mixed growth view highlights the need for more careful research into the company’s business parts and market position to judge if past profitability and growth can be restarted.

Is OneSpan a Lynch-Type "Dull" Chance?

Peter Lynch was known for liking "dull" companies in ordinary industries that were simple to grasp. OneSpan works in the digital security and agreement field—a sector that may appear complicated, but its main job of protecting online transactions and allowing digital signatures is turning into a basic need for everyday business and finance. While not a consumer "buy what you know" tale, it supplies important, repeating infrastructure. The mix of a clear balance sheet, high profitability, and a very fair price presents a standard GARP situation: a financially sound company available at a price that does not expect exceptional future growth.

For investors wanting to examine other companies that meet similar disciplined filters, you can see the current Peter Lynch Strategy screen here.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making any investment decisions.