OneSpan Inc. (OSPN) stock intrinsic value fair value estimate & owner earnings analysis

OneSpan provides digital identity, authentication, and e-signature/workflow software used mainly by banks and other financial institutions. The business has been in the middle of a long transition: as recently as 2015, four out of every five dollars of revenue came from Digipass, the company's hardware security tokens; by 2025 that figure was down to about one in five, with the rest now coming from software — fraud prevention and authentication (the Cybersecurity segment) and electronic signature and agreement workflows for regulated industries (the Digital Agreements segment). Alongside that shift, the company ran a multi-year cost-reduction program from 2021 through 2025, which is now complete. The combination shows up clearly in the numbers: 2021 through 2023 were burdened by heavy severance and restructuring charges and produced weak or negative results, while 2024 and 2025 both produced strong, clean cash generation, no debt, and the return of capital to shareholders through dividends and buybacks. We based our estimate of normalized owner earnings — cash profit after real costs, including stock compensation and the portion of capital spending needed just to maintain the business — on the middle of the last three fiscal years (2023 through 2025). Because 2023 was still absorbing the tail of the restructuring program, it comes in as the weakest of the three, and the median lands on 2024's result of roughly $1.09 per share, with 2025 coming in higher at about $1.16. One accounting judgment worth noting: both 2024 and 2025 net income included large one-time tax benefits from releasing a deferred-tax valuation allowance as the company returned to sustained profitability. We treated those releases as non-cash and non-recurring and excluded them from owner earnings, rather than letting a tax bookkeeping event inflate our estimate of the company's real earning power. Our base case assumes owner earnings grow at a decelerating pace — starting at 6% next year (below the roughly 7% actually achieved in 2025, since we default to the more conservative trailing rate absent a specific catalyst for acceleration) and settling toward a 3% pace by year ten, as the Digital Agreements and Cybersecurity software lines continue to more than offset the ongoing decline of the legacy hardware token business. Beyond that, we assume the software franchise — serving a broad, non-concentrated base of banking customers under renewing contracts — continues to earn roughly its year-ten level with only slight real growth, since ongoing product investment is already funded inside our earnings figure. On this path, the shares are worth around $28 today. About two-thirds of that value depends on what the business earns beyond the ten-year mark, which is worth flagging plainly: a meaningful share of this valuation rests on the software business continuing to hold its ground for many years past our explicit forecast. Our bear case assumes the legacy hardware decline accelerates and competitive pressure from larger identity-security platforms compresses margins and slows software growth for several years — a setback comparable to, though not quite as severe as, the pandemic-era hit the company took in 2020, without a market recovery to lean on for a rebound. Owner earnings would decline for two to three years before stabilizing at a permanently lower level. That scenario values the shares at roughly $15. Our bull case assumes the company's own execution accelerates — broader adoption of e-signature and workflow tools across its existing bank customer base, and cross-selling of fraud-prevention software into that same base, lifting growth into the low double digits for several years before moderating. That would value the shares at roughly $41. Given how much of the downside case still holds value (roughly half of the base case), the margin-of-safety price sits at a meaningful discount to our base-case estimate, around $19.50 per share, and it assumes one more full year of results confirms that 2024-2025 was the company's real run rate rather than a temporary bounce off the restructuring. One item we could not fully reconcile from the filings: a small residual gap of a few percent between reported operating cash flow and the reconciliation built from individually disclosed line items in certain years, likely reflecting minor non-cash items not separately broken out; it is too small to change the picture.