NICE Ltd. (NICE) helps businesses improve customer service, drive performance through data analysis, ensure compliance, and fight financial crime, explains Doug Gerlach, editor of Investor Advisory Service.
Over the years, the company it has built a customer base of 20,000 organizations in more than 150 countries, including over eighty "Fortune 100" companies.
Customer Engagement, 79% of 2017 sales, includes applications that manage real time customer interactions over the telephone, in person, and various digital routes such as e-mail and messaging. These applications serve call centers, back office operations, and retail branches across business markets including communications, banking, insurance, health-care, government, and others.
The Financial Crime and Compliance segment provides solutions for real-time and cross-channel fraud prevention, anti-money laundering, brokerage compliance, and enterprise-wide case management.
NICE applications monitor millions of financial transactions daily, enabling customers to mitigate the risk of financial crime, improve compliance, and reduce operational costs. Customers include some of the world’s largest financial institutions and regulatory authorities.
A few years ago, the company introduced a Cloud-ased SaaS (Software as a Service) offering for its Customer Engagement segment which was radically enhanced by the November 2016 acquisition of inContact. inContact added approximately $250 million to annual sales and was integrated into NICE’s Customer Engagement Cloud offering under the name CXone.
CXone has been growing over 20% organically and accounted for 34% of NICE’s sales in the third quarter of 2018. The success of CXone has boosted the percentage of recurring revenue for NICE to 72%, a number assured to grow as companies seek Cloud offerings that are flexible, quicker to deploy, and have lower up-front costs.
In addition to excellent growth from CXone, NICE is introducing X-Sight, a Cloud offering for its Financial Crime and Compliance segment, and a services consulting practice. These new offerings should boost the segment’s high-single digit sales growth rate as companies prefer the flexibility of Cloud offerings that can be quickly altered to meet emerging threats and analytical needs.
Analysts expect NICE to grow non-GAAP EPS at an average annual rate of 14%. The firm should be able to grow GAAP EPS more rapidly as amortization and employee stock compensation charges recede.
Five years of 17% GAAP EPS growth multiplied by a high P/E of 36.9 generates a high price of $225. If achieved, this would represent annual compound growth of 17% for the shares. We model an upside-to-downside ratio for the stock of 3.2 to 1.
