The Canadian penny is on its way out, and cash transactions are increasingly rare as well. Although it may not be a household name, this maker of transaction-processing software is aggressively seeking an even greater share of the market in credit card, debit card and smartphone payments.
ACI WORLDWIDE (Nasdaq symbol ACIW; www.tsainc.com) makes software that is used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments.
In mid-February 2012, ACI completed its purchase of S1 Corp. for $540 million in cash and stock. This acquisition is a good fit: S1 sells transaction software for banks, credit unions, retailers and other payment processors. It has over 3,000 clients worldwide.
In the first quarter of 2012, ACI’s revenue rose 31.6%, to $137.6 million from $104.5 million a year earlier. The gain was largely due to S1’s $22.5-million contribution. Without acquisition-related costs, earnings per share rose sharply, to $0.28 from $0.05.
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Tech stocks: ACI maintains high research spending to offer most advanced transaction software
ACI holds cash of $201.1 million, or $5.05 a share. Its long-term debt of $352.5 million is a low 22.0% of its market cap.
The company spends a high 22% of its revenue on research. That will let it keep offering the most advanced transaction-processing software. This includes switching from cash and cheques to credit and debit cards, as well as mobile payments with smartphones.
The stock trades at a high 31.9 times ACI’s forecast 2012 earnings of $1.26 a share.
In the latest edition of Stock Pickers Digest, we look at ACI’s projected earnings for next year and whether or not it can sustain its strong growth in a highly competitive business. We conclude with our clear buy-hold-sell advice.
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