The Long Case for Nice Systems

Aug.17.06 | About: NICE-Systems Limited (NICE)

After reading and hearing all the talk about "Terrorists," I thought to myself how this could translate to making money. So I wanted to highlight a company that will benefit when companies and governments will play the "rather safe than sorry" game.

The terror alert in the UK recently was in a way good news for Nice Systems (NASDAQ:NICE). I know that some of you may think that I am nuts, but I believe fear creates opportunity, which can make investors money.

Catalysts that make NICE a buy:

  • NICE is headquartered in Israel. What does that have do with anything? Well, first of all nobody knows security issues and terrorism like the Israelis. The “terrorist premium” is already factored into the market. In other words, the economy looks at a terrorist attack now as part of the landscape. It is almost like a hurricane.
  • They recently announced second quarter earnings that were better than Wall Street’s expectations. Revenue surged by over 30%. In the conference call, the CEO mentioned, "Our results reflect very strong market demand for our Insight from Interactions solutions, coming in from all regions and all market segments."
  • Due to this strong demand, NICE, for the full year, lifted its earnings forecast to $1.06 to $1.15 per share, up from a previous projection for $1 to $1.06 per share. Revenue for the year is expected to range from $408 million to $417 million, up from prior guidance for $395 million to $405 million.
  • Valuation: NICE has Quarterly Rev. & Earnings Growth of 35.3% & 59%, respectively, no debt & 6$ per share. A test I usually put a company’s earnings through is whether the OPS is greater than the EPS. In the world we live in today, a company's EPS can be easily manipulated (not that NICE does that) but operating cash flow per share, hard to do! NICE has 1.36 OPS which is greater than its trailing EPS of 0.89 (even if we take expected EPS of 1.06), thus reflecting earnings are of high quality.
  • For the times we live in, I believe paying a 28 multiple for NICE is not so bad for the growth it provides & its niche.
  • Lastly, I’d like once again reiterate that this attempted attack will help boost security companies, which will benefit from the calling by governments and corporations alike, to help prevent such calamities.
  • NICE 1-yr Chart

    Disclosure: I do not own NICE