ACI WORLDWIDE $25.19 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative)(402-390-7600; www.tsainc.com; Shares outstanding: 116.7 million; Market cap: $3.0 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 has made a series of acquisitions in recent years. In November 2013, it paid $109 million for Official Payments Holdings, which processes 20 million payments totalling over $9 billion a year. It also added Retail Decisions (ReD) for $205 million in August 2014. ReD is an e-commerce and fraud-prevention firm whose software serves the payments industry.
In the three months ended March 31, 2015, the company’s revenue rose 5.1% to $232.8 million from $221.5 million a year earlier. ACI typically has higher sales and profits in the last half of each year, which is the busiest period in its customers’ purchasing cycle.
The company earned $2.0 million, or $0.02 a share, compared to a year-earlier loss of $2.0 million, or $0.02. Cost-cutting measures helped improve the latest quarterly results.
ACI’s long-term debt of $758.8 million is a reasonable 25.3% of its market cap. However, its rapid growth by acquisition over the past few years has pushed up its goodwill and intangible assets to $1.0 billion, or a high 33.3% 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 33.6 times ACI’s forecast 2015 earnings of $0.75 a share. Any major problems integrating its latest acquisitions could sharply reduce that estimate.
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