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Company: VistaPrint (VPRT)
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  Why VPRT is Overpriced

There is some concern about several issues, that, for some, overshadow the company's strong growth.

1. The company has lost two CFOs and a CIO over the last couple of years, and the argument is that such senior staff don't leave unless there are some concerns about the company's financial state.

2. The company has an offshore corporate structure which, while perfectly legal, is relatively uncommon amongst US public listed companies. There's a concern that this structure (the company headquarters are in Bermuda) is a way to avoid US consumer protection laws and tax regulations. The bigger concerns is that the lower tax rate achieved (the company achieves around 10% effective tax rate vs. 15% to 35% for US corporate tax rates) is unsustainable, given IRS concerns about the loss of potential tax revenues.

3. The biggest concern is the VPRewards scheme, a membership savings club with monthly credit card payments. This is run by a separate company, and VistaPrint derives referral revenue from this. VistaPrint customers are offered savings on their order, and then enrolled in the scheme. The problem is that many customers feel that they are enrolled without their knowledge. They argue that the savings are clearly displayed, but the nature of the membership and its monthly fee, is not. There are many unhappy customers who have had monthly credit card charges which they don't think they agreed to. Some customers are particularly angry, and feel that this is a deliberate scam on the company's part. As the company derives over 60% of its revenue from repeat customer purchases, it's not likely that the company is engaged on a deliberate scam.

A more objective criticism is that the referral revenue distorts the company's true financial position. The referral revenue has almost no associated costs, it's almost pure profit. So a relatively small revenue (5% or so) from this source has a relatively large (30% or so) impact on the net income. The concern is that the core business (printing) is therefore much less profitable than it appears from the financial statements. And if it's less profitable, then the stock is overpriced.

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