Cheap Nuance Attracts Interest From Carl Icahn

| About: Nuance Communications, (NUAN)

Nuance Communications (NASDAQ:NUAN) has been under pressure and has underperformed the overall market since early February when it released a disappointing earnings report. However, these shares are starting to attract a noted activist and have had some other positive catalysts. These positives should power the shares higher in the coming months.

Recent positives for NUAN:

  • Noted activist Carl Icahn has just disclosed an over 9% stake in the company.
  • The company just launched voice mobile ads.
  • An option buyer took a large position in the July 19 calls in early March.

Nuance Communications provides voice and language solutions for businesses and consumers worldwide.

5 additional reasons NUAN is going higher from just over $21 a share:

  1. The 13 analysts that followed the stock have a $28 median price target on the shares, more than 30% above its current stock price.
  2. The stock sells for 10x forward earnings, a discount to its five-year average (13.5).
  3. Analysts project revenues will increase almost 25% in FY2013 and just under 15% in FY2014. The stock sports a five-year projected PEG of under 1 (.67).
  4. NUAN sells near the bottom of its five-year valuation range based on P/E, P/S, P/B and P/CF.
  5. The company has grown revenues at an approximate 17% CAGR over the past five years. Nuance has also grown operating cash flow 60% over the last three years.

Disclosure: I am long NUAN. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.