Dutch Treat 

11/17/2009 11:17 am EST

Focus: GLOBAL

John Christy

Founding Editor, Forbes International Investment Report

VistaPrint has turned its expertise in business cards into a lucrative and rapidly growing Internet franchise, writes John Christy in the Forbes International Investment Report.

Creating a $500-million-a-year business from scratch in less than ten years is an impressive feat. Of course, Internet startups do it all the time, but generating real profits is usually an after-thought. VistaPrint (Nasdaq: VPRT) is a rare example of a company that has grown both quickly and profitably. It’s Internet-based, but it also has a real business model, real earnings, and real cash flow.

VistaPrint has accomplished this with a lesson from Entrepreneurship 101: tap into an unmet customer need. Small companies need lots of printed materials—business cards, brochures, signs, letterheads, and so forth. But high-quality printers and graphic design services typically aren’t cost effective for small projects. VistaPrint has found a way to deliver these services over the Internet at a reasonable cost. A typical order costs about $30 and takes just a few days to turn around.

When the company began operations in 2000, it was mainly a business-card shop. As recently as 2004, business cards accounted for 60% of revenue. VistaPrint’s product line has since expanded to include a full range of customized items—from signs to mouse pads to gift items. Business cards are still important, but they now account for less than 40% of revenue.

VistaPrint has also expanded its horizons globally. Sales outside the US account for almost 40% of total Revenue, versus just 23% at the time of the company’s IPO in 2005. The company recently moved its headquarters to the Netherlands and has a significant European customer base. But ultimately it is a true online business.

Each quarter, approximately 1.5 million new customers discover VistaPrint via its Web site. And once customers are in the door, VistaPrint has done a good job keeping them happy. About two-thirds of revenue comes from repeat customers.

In its most recent fiscal year, ended June 30th, VistaPrint reported revenue of $516 million. It was a 29% increase during a period that includes some of the darkest days of the global financial crisis. Since 2006, the company’s earnings per share have grown at more than 40% on an annualized basis.

There’s an important caveat: Unlike its services, VistaPrint’s valuation isn’t exactly cheap. At a recent $51, the company sells for 21x estimated fiscal 2011 earnings. [Shares topped $54 Friday—Editor.] But for a company that is growing so rapidly—and one that has been able to throw off so much cash in a brutal economic environment—it may ultimately be worth the price.

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