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Amdocs Limited (DOX), J2 Global Inc (JCOM): Three Business Software Stocks to Watch

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As the business world becomes more complex, those software companies that offer services that simplify everyday tasks hold bright growth prospects. J2 Global Inc (NASDAQ:JCOM), Citrix Systems, Inc. (NASDAQ:CTXS), and Amdocs Limited (NYSE:DOX) are three of these firms, and thus deserve a closer look from investors. Should we dig in?

Fax not dead

J2 Global Inc (NASDAQ:JCOM)

J2 Global Inc (NASDAQ:JCOM) provides cloud-based communications and messaging services worldwide. Trading close to a 5-year high at about $42, or 16.8 times its earnings, is this stock a buy? I’d say it is. Offering a 2.27% dividend yield, strong profitability and solid growth prospects, this is a stock to add to your long-term portfolio. Upside potential looks significant.

J2 Global Inc (NASDAQ:JCOM)’s digital faxing services are increasingly attractive to enterprises looking to reduce costs while ameliorating the security of its information transfers. Holding about 30% of the global market share, the company seems advantageously positioned to benefit from the increasing demand.

Acquisitions will also help expand the company’s footprint and contribute to revenue growth over the years to come. The recent purchase of New Zealand-based Zintel Communications is living proof of this, having augmented the firm’s cloud voice service’s penetration across the Asia-Pacific region. Furthermore, a strong liquidity and cash generation capabilities will help pursue the acquisitions without acquiring significant debt. Apart from operating in the cloud segment, the company recently entered the media sector through the acquisitions of Ziff Davis and IGN, which are expected to continue to grow at double-digits for a few quarters yet.

It’s all about customer care

Amdocs Limited (NYSE:DOX) provides customer care, billing and order management systems for communications and Internet companies worldwide. Its scale and wide product offering have differentiated it from its peers and positioned it in an industry leading position. Servicing many major providers around the world while enjoying of high clients stickiness due to elevated switching costs, this moated company looks like a buy and hold case.

In terms of valuation, Amdocs Limited (NYSE:DOX)’ stock trades at 15 times its earnings, about a 10% discount to the industry average. Meanwhile, the company offers a 1.39% dividend yield, supported by almost $1 billion in cash and marketable securities and a debt-free balance sheet.
Moreover, long-term service contracts assure the firm a steady cash inflow.

Going forward, Amdocs Limited (NYSE:DOX)´ strong focus on R&D will help it keep ahead of the competition and capture larger market shares. Acquisitions will also help drive growth, both by expanding the (already) widest portfolio in the industry and by increasing exposure to under penetrated markets or segments.

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