Amdocs: Time To Play Catch-Up

Sep. 15, 2020 9:28 AM ETAmdocs Limited (DOX)IGV, T, TMUS7 Comments
Michael Fitzsimmons profile picture
Michael Fitzsimmons


  • Amdocs has greatly underperformed the software sector and even the S&P 500.
  • Yet the billing software company is a slow and steady performer that has 17% margins and generates significant FCF.
  • The current P/E=16 and is considerably below the market average. The recent quarterly dividend was up 14.9% yoy.
  • The company could deliver 25% total returns over the next 12 months.

Amdocs (NASDAQ:DOX) is primarily a provider of billing and customer-care software to wireless companies, cable service providers, and media businesses. The stock has been a severe laggard in the IT sector over the past year and has underperformed the iShares Expanded Tech-Software ETF (IGV) by ~50%. DOX even trails the S&P 500 by ~25%:

Source: Seeking Alpha Charting Tool

By those statistics alone, investors might conclude that Amdocs is not performing very well. Let's take a look at DOX's financial performance and see if it reflects the weak stock price.


Amdocs released its Q3 EPS report (for the calendar Q2 period) on August 5th. Highlights include:

Source: Q3 EPS Report

As can be seen from the graphic above, DOX's last-nine-months revenue rose only 2% as compared to the year earlier period. Yet with a good handle on expenses and an outstanding share count that shrunk almost 3%, nine-month EPS was up 4.7% and the Q3 quarterly dividend ($0.3275/share) was up 14.9% yoy. But note that FCF/share (see below) was $1.08/share in the quarter - over 3x the current quarterly dividend.

Quarterly highlights included:

  • Revenue exceeded the midpoint of guidance even after adjusting for a positive FX adjustment.
  • Managed services revenue (59% of total revenue) was a record $604 million - up 4.6% yoy.
  • GAAP and non-GAAP EPS was above the midpoint of guidance.
  • Operating margin was 14.4%.
  • Quarterly free-cash-flow ("FCF") was $146 million ($1.08/share).
  • Cash and cash equivalents were $1.19 billion at the end of the quarter (an estimated $8.83/share).
  • The 12-month backlog was $3.48 billion - up $20 million sequentially and up 2.4% as compared to Q3FY19.
  • Repurchased $60 million of common shares during the quarter.

Shuky Sheffer, president and CEO of Amdocs said:

Our fiscal Q3 was our first full quarter operating under the global conditions

This article was written by

Michael Fitzsimmons profile picture
Technology stocks, ETFs, portfolio strategy, renewable energy, and O&G companies. Primary goal is growing net-worth. I typically allocate a portion of my own portfolio and devote some of my SA articles to small and medium sized companies offering compelling risk/reward propositions. I am an Electronics Engineer, not a qualified investment advisor. While the information and data presented in my articles are obtained from company documents and/or sources believed to be reliable, they have not been independently verified. Therefore, I cannot guarantee its accuracy. I advise investors conduct their own research and due-diligence and to consult a qualified investment advisor. I explicitly disclaim any liability that may arise from investment decisions you make based on my articles. Thanks for reading and I wish you much investment success!

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.

Additional disclosure: I am an engineer, not a CFA. The information and data presented in this article were obtained from company documents and/or sources believed to be reliable, but have not been independently verified. Therefore, the author cannot guarantee their accuracy. Please do your own research and contact a qualified investment advisor. I am not responsible for the investment decisions you make.

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