Real Story: VistaPrint Can't Hear the Knockin'

Business Practices

Another issue that may open the door for competitors is VistaPrint's reputation. It appears customers either love or hate the company. VistaPrint boasts that 63% of revenue came from repeat business in the third quarter.

However, Internet message boards are full of complaints from unhappy consumers who have received charges for Passporttofun and BusinessMax on their credit cards after purchasing products from VistaPrint. A VistaPrint spokesperson said that those are reward programs that users must opt into and that they are sent several emails confirming their participation. Nevertheless, the charges seem to have caught quite a few people off guard.

VistaPrint has been able to create its large customer database through aggressive marketing techniques. However, the company's email campaigns have landed it on one or more blacklisting entities, according to the company's most recent 10-Q filing. VistaPrint believes its email solicitations comply with all laws and the company is a member of the Messaging Anti-Abuse Working Group, which promotes best practices for email marketing.

The Better Business Bureau has an unsatisfactory rating on VistaPrint: It received 129 complaints in the past 12 months. Of these, 76 were resolved by the company, 52 were administratively resolved (which means the case is closed but doesn't guarantee that the complaining party was satisfied) and one remains unresolved. That compares with iPrint, which had five resolved complaints, or Printingforless.com, which had zero complaints in the same period. Both companies have a satisfactory record. But keep in mind, both businesses have a smaller customer base than VistaPrint.

Valuation

The stock is currently trading around $31. But Rosencrans believes the stock is worth $20 based on an enterprise value-to-sales ratio of 4.4. While VistaPrint is the only online consumer-focused printer that is publicly traded, Rosencrans notes other printers such as R.R. Donnelley & Sons (RRD Quote), Bowne & Co. (BNE Quote) and Quebecor (IQW Quote) trade at an EV/sales multiple of 1 or below.

One last issue that could put pressure on the stock -- on March 29, 29.5 million shares were freed from lockup. There are currently 40.1 million shares outstanding, so liquidation of those shares could weigh heavily on the stock price. Executives, including Keane, directors and venture capital partners have already dumped some shares. The company estimates that 16 million shares have not yet been sold.

VistaPrint is an example of a strong business that is probably at the top of its game right now. As more competitors invade the space, it's likely the stock will have nowhere to go but down.