Nuance Communication Poised For Breakthrough

Dec.28.11 | About: Nuance Communications, (NUAN)

Nuance Communications (NASDAQ:NUAN) seems to be staging a breakthrough in price, as confirmed on this graph provided by Barchart :

Nuance Communications, Inc. provides voice and language solutions for businesses and consumers worldwide. It offers dictation and transcription solutions and services, which automate the input and management of medical information; and speech recognition solutions for radiology, cardiology, pathology, and related specialties that help healthcare providers dictate, edit, and sign reports without manual transcription. The company also offers mobile and consumer solutions and services comprising an integrated suite of voice control and text-to-speech solutions, desktop and portable computer dictation applications, predictive text technologies, mobile messaging services, and emerging services, such as dictation, Web search, and voicemail-to-text for manufacturers and suppliers of mobile phones, automotive products, personal navigation devices, computers, and other consumer electronics.

In addition, it provides customer service business intelligence and authentication solutions for enterprises in the telecommunications, financial services, travel, entertainment, and government sectors to support, understand, and communicate with their customers. Further, the company offers document imaging, print management, and PDF solutions to multifunction printer manufacturers, home offices, small businesses, and enterprise customers; software development toolkits for independent software vendors; and licenses its software to multifunction printer manufacturers. Nuance Communications, Inc. markets and sells its products through direct sales force; its e-commerce Web site; and a network of resellers, including system integrators, independent software vendors, value-added resellers, hardware vendors, telecommunications carriers, and distributors. The company was formerly known as ScanSoft, Inc. and changed its name to Nuance Communications, Inc. in November 2005. Nuance Communications, Inc. was founded in 1992 and is headquartered in Burlington, Massachusetts. (Yahoo Finance profile.)

Factors to Consider

Barchart technical indicators:

  • 67% Barchart long term technical buy signal
  • Trend Spotter sell signal getting weaker
  • Trading above its 20, 50 and 100 day moving averages
  • Just 7.10% off its 1 year high
  • Relative Strength Index 52.89%
  • Barchart computes a technical support level at 24.43
  • Recently traded at 25.08 with a 50 day moving average of 24.88

Fundamental factors:

  • 19 Wall Street brokerage houses have assigned 20 analysts to monitor the company's numbers
  • Analysts predict revenue will increase by 20.40% this year and another 14.00% next year
  • Earnings estimates are for an increase of 16.90% this year, an additional increase of 11.30% next year and continue to increase annually at the rate of 15.00% for the next 5 years
  • These consensus numbers resulted in analysts issuing 8 strong buy, 8 buy, 3 hold, no under perform and a single sell recommendations for their clients
  • The 28.25 P/E ratio seems warranted by a stock with double digit increases forcasted for both revenue and earnings

General investor interest

  • Using the readers of Motley Fool as an individual investor barometer interest is wide in this stock
  • 5,661 of the readers voted 96% that the stock will beat the market
  • The more savvy All Stars voted 98% for the same result
  • Jim Cramer gave a sell signal on this stock and the price is up 114.85% since he advised his viewers to sell

You should always compare a stock price momentum over the past year and with NUAN up 38%, IBM (NYSE:IBM) is up 26%, Medquist (MEDH) up 8% and Microsoft (NASDAQ:MSFT) down 7%.

Summary

Nuance Communications is a stock with current upward price momentum based on forecasts of double digit increase in both revenue and earnings. Care should be taken due to the high P/E ratio. Use the lower 14-day turtle channel or the 50-day moving average as your exit point, and you should be able to make a few dollars in the short term.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in NUAN over the next 72 hours.