In addition, on its conference call, NICE outlined that the Dodd-Frank act will likely increase financial companies’ enforcement and regulatory activity. This is good news for NICE, because financials are likely to buy more compliance and monitoring solutions as a consequence.
What the industry is saying
In general, the rest of the data capture and analytics industry has been reporting good market conditions. For example, despite reporting a mixed set of results in July, International Business Machines Corp. (NYSE:IBM) generated 11% growth from its business analytics solutions. Meanwhile, NICE’s perennial rival and potential merger partner, Verint Systems Inc. (NASDAQ:VRNT), maintained its full-year revenue guidance of 6%-7% at its results in June.
Verint is a good potential partner, because its strength is in security and government-based work, while NICE is stronger with enterprises (particularly financial companies) and call-centers. Despite reducing its guidance for its European operations, Verint Systems Inc. (NASDAQ:VRNT)’s overall view on the first quarter was one of “particularly strong business activity relative to the first quarter in the year.” In addition, Verint Systems Inc. (NASDAQ:VRNT) reported similar business trends to NICE, with its analytics solutions generating faster growth than its legacy capture systems.
Where next for NICE?
For the reasons outlined above, NICE has good chances to hit its full-year guidance of around $2.60, putting the stock on a forward P/E ratio of around 14.4 times earnings. That looks cheap for a business with good long-term prospects, and relatively defensive growth properties.
Nice Systems Ltd (ADR) (NASDAQ:NICE) has a tradition of good cash flow generation, having generated an average of around $125 million in free cash flow over the last three years. This figure represents around 6.2% of its current enterprise value. In other words, there is plenty of scope to increase its dividend yield of around 1.4%. Furthermore, the shift towards more services revenues is likely to increase cash flow generation in future.
In conclusion, the stock represents a good way to get exposure to big data spending, and is a good value proposition for more cautiously minded tech investors. It could also see some upside if the market reevaluates it as a big data play.
The article Why This IT Company Can Outperform originally appeared on Fool.com and is written by Lee Samaha.
Lee Samaha has a position in NICE Systems. The Motley Fool owns shares of International Business Machines. Lee is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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