SAN FRANCISCO -- Technology security company Vasco ( VDSI) continues to prove skeptics wrong.

Despite two recent analyst downgrades over concerns that Vasco could be headed for a slowdown, the stock is breaking through to a new 52-week high.

Vasco shares were recently up 96 cents, or 2.6%, to $38.04.

The downgrades handed down last month by analysts from Friedman Billings and RBC Capital came with concern that Vasco's stock may have reached its "fair value" and that the company's business could be affected by the turbulence in the financial services market, a segment in which Vasco has significant exposure.

But the opinions have had little effect, largely because valuation worries are nothing new to Vasco.

The stock's spectacular rise -- it has gone from less than $500 million in market cap to nearly $1.5 billion in 10 months -- has stunned analysts and continually raised fears that Vasco's winning streak may be nearing an end.

But Vasco has yet to take a breath -- its shares have soared nearly 210% in 2007.

The key, say some analysts, is that Vasco has yet to disappoint with its financial results.

The company has been one of the security software sector's strongest performers, with strong execution and consistent earnings. Vasco posted stunning year-over-year revenue growth of 75% in its latest quarter.

For the third quarter, analysts polled by Thomson Financial are expecting EPS of 16 cents on revenue of $31.1 million. A year earlier, the company reported earnings of 9 cents a share on revenue of $18.7 million.

Naysayers believe investors are already counting on spectacular third-quarter results, expected later this month, and that further upside could be limited.

"While the third quarter is tracking in line slightly ahead of our expectations, shares are already baking in this news, which limits the significant upside in the near term," wrote Friedman Billings analyst Daniel Ives in his report last month. Friedman Billings makes a market in Vasco shares.

At the time, with Vasco trading around $34, Ives believed the stock could be in for a breather "as the company must continue to raise the guidance bar in order for the stock to move appreciably higher over the coming quarters." At his price target of $36, the company's stock would trade for 42 times the fiscal 2008 estimates, Ives wrote.

But that's the kind of premium valuation that Vasco deserves, argues Sean Jackson, an analyst with Avondale Partners.

"The company is doing very well," he says. "There doesn't seem to be any loss of momentum with them and that is the key to the story." Avondale doesn't own shares or have an investment banking relationship with Vasco.

Vasco's third-quarter results should go a long way toward showing whether the stock can sustain its run. And with a new 52-week high, Vasco shareholders can't afford to see any missteps.

"Any hint of a slowdown in growth or loss of momentum will really hurt them since the P/E is so high," says Jackson. "If they are going to hit the estimates, then the stock is fairly valued but estimates are conservative."

If Vasco can solidly beat expectations and/or raise guidance, the company's stock could get another leg up, say analysts.

But Vasco faces some significant challenges. The company's entry in the U.S. has been slow, with less than 10% of its revenue coming from this country. Although it has been expanding quickly in Asia and Latin America, it will need to prove that it can crack the U.S. market.

"On the retail banking side they are not getting much traction at all," says Jackson. "But that's not very surprising since they are not spending much marketing efforts there."

Despite the hurdles, Vasco continues to look like the best bet in the sector.

"If you are an investor looking for a high growth name with lot of momentum, then it is tough to find one better than Vasco," says Jackson.

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