ACI WORLDWIDE $21.09 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative)(402-334-5101; www.tsainc.com; Shares outstanding: 114.9 million; Market cap: $2.4 billion; No dividends paid) makes software for processing transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. The company’s products also help cut fraud. Clients include leading global retailers, plus two-thirds of the world’s 100 largest banks.
ACI’s industry-leading products continue to attract prominent clients. For example, the company provides the technology behind Apple Inc.’s new mobile payment system, called Apple Pay.
ACI’s revenue rose 17.5% in 2014 to $1.02 billion from $864.9 million in 2013. That was mainly due to contributions from acquisitions, including the purchase in August 2014 of Retail Decisions (ReD) for $205 million.
On the other hand, the costs of integrating the new additions held back earnings per share to a gain of just 2.8%, to $0.72 from $0.70.
ACI’s long-term debt of $804.6 million is a reasonable 33.5% of its market cap. But the company’s rapid growth by acquisition over the past few years has pushed up its goodwill and intangible assets to $1.0 billion. That’s a high 41.7% of its market cap.
The company is well positioned to benefit from the global shift toward online payments. However, the stock trades at a high 28.1 times forecast 2015 earnings of $0.75 a share. Any major problems integrating its acquisitions could cut that estimate significantly.
ACI Worldwide is a hold.
