Nuance Communications Inc. (NUAN): This Speech Recognition Company Faces Headwind

Bottom line

Nuance Communications Inc. (NASDAQ:NUAN) is trading at an attractive forward P/E, but you must be aware that estimates often change. Earnings estimates for the next quarter have dropped 35% during the last 90 days. If the company fails to catch momentum, the estimates would fall further, and shares would be punished. On the other hand, the healthcare segment seems to perform well. The company has announced a $500 million stock repurchase plan. Still, the competitors’ stocks look more attractive. Microsoft Corporation (NASDAQ:MSFT) trades at an 11.63 forward P/E and pays a 2.58% dividend yield. Google Inc (NASDAQ:GOOG) trades at a 16.32 forward P/E and is positioned to turn into an information monopoly. Normally, you would expect smaller companies to offer better growth prospects to justify bigger investment risks.

Currently, Nuance does not present such an opportunity.

Vladimir Zernov has no position in any stocks mentioned. The Motley Fool recommends Google and Nuance Communications. The Motley Fool owns shares of Google, Microsoft, and Nuance Communications.

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