In the world of identity theft, it doesn’t pay to assume “it won’t happen to me.”#-ad_banner-#

In fact, with an average of a new victim every three seconds in 2012 — and the rate of breaches seeming to increase at a faster pace than the national debt — you might as well assume that it will happen to you and be prepared when it does.

Identity theft can dig you a debt ditch deeper than the Mariana Trench. But I’ve found a $1.4 billion company — a mere pollywog among the multi-billion-dollar big fish in this sector — that’s throwing out lifelines to consumers and dishing out profits to investors.

In fact, this little gem just reported record revenues and hundreds of thousands of new customers in the third quarter. Its IPO went for $9 just over a year ago, and newcomers to the stock are basking in 75% gains.

We’ll take a closer look at the company in a moment, but first, let’s talk about what drives this crime today, how big the business of identity theft has become, and what is being done to protect people like you and me.

A $21 Million Violation Of Privacy
Unfortunately, the same technologies that make banking, shopping and working so convenient also make identity theft easier. An estimated 12.6 million people were victimized last year, at a cost of $21 billion. At a projected annual growth rate of 4%, the losses are on pace to grow even more staggering.

Stolen Social Security numbers caused the most damage because they’re almost always required to open new accounts, but credit card fraud accounts for more than 65% of all cases.

The ways in which thieves steal information has become sophisticated: They can read “noise” waves and intercept data with ATM skimmers, or infiltrate peer-to-peer networks like music sites. Other ways include phishing (by email), “SMSishing” (by text) or “Vishing” (by voicemail).

It’s not all rocket science, though. Many old-school ways still work: Dumpster diving, wallet stealing, snail mail swiping, looking over someone’s shoulder at a device, giving credit card numbers to customer service reps or inputting any data online.

Unfortunately, thefts are adept at cracking codes, creating viruses and weaseling their way into improperly secured networks at work, school, banks — really, any place that involves a computer.

People can only go so far to protect themselves, and, unfortunately even the most savvy IT professional in the world isn’t capable of building an impenetrable fortress.

Unlocking The Door To Profits
Because identity theft has become so prevalent and such a burden, that gem I mentioned, LifeLock (NYSE: LOCK), is resonating with consumers.

For $25 a month, LifeLock will remove your name from junk-mail lists; monitor the Web for fraudulent use of your name, Social Security number and other personal information; and alert you about potential breaches. Additionally, it says it will spend up to $1 million to help subscribers if they do become victims.

If any of this is ringing a bell, it may be because of a rather embarrassing advertising strategy the company used in 2007. To prove his company’s prowess at preventing ID theft, LifeLock CEO Todd Davis shared his Social Security number in a TV commercial. The stunt backfired on him, as he subsequently became a victim of identity theft himself — 13 times over. As a result, the Federal Trade Commission fined the company $12 million.

In the past, the company was criticized for preying on the fear of identity theft rather than providing a service that prevented it. Others claimed the measures LifeLock took could be done by anyone, without its help, which is true. But in today’s rush-rush world, not many people want to take the trouble or time to constantly monitor personal data… and LifeLock is happy to do so.

Whether or not you like the company’s in-your-face advertising is moot, considering LifeLock’s recent boom in popularity. Third-quarter 2013 revenue rose by 33%, to a record $95.7 million. It also added 218,000 new members and improved retention rates. Adjusted net income grew a startling 28%, and shareholders rewarded the stock with a one-day gain of 16%.

Looking ahead, LifeLock sees the growing theft from mobile devices as another opportunity and expects fourth-quarter revenue of about $100 million.

Despite a crowded market that includes Oracle (Nasdaq: ORCL), SAP (NYSE: SAP), Adobe (Nasdaq: ADBE) and Salesforce.com (NYSE: CRM), LifeLock has carved out a lucrative little niche. Stock is up 92% this year, including 30% in the past 12 weeks.

Risks to Consider: LifeLock is an expensive stock, trading at nearly 32 times estimated revenue for 2014. As an upside risk, the security sector is ripe for mergers and acquisitions, and being so small, LifeLock may look appetizing to some of the bigger players.

Actions to Take –> I see little other than upside for LifeLock in the short term. Barring another Homer Simpson-like move on the part of management, I’d buy at today’s price.

P.S. Despite LifeLock’s impressive results, privacy threats like ID theft aren’t going anyway anytime soon. The next privacy threat won’t come from the IRS, the Department of Justice or the NSA. Instead, the government’s own data suggest it could come through a device Obama’s been using since the day he took office. Get all the details by clicking here.