ACI WORLDWIDE $29.96 - Nasdaq symbol ACIW

ACI WORLDWIDE $29.96 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 34.3 million; Market cap: $1.0 billion; No dividends paid) makes software that is used to process transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments.

ACI recently bought S1 Corp. for $540 million in cash and stock. This acquisition looks like a good fit: S1 sells transaction software for banks, credit unions, retailers and other processors. It has over 3,000 clients worldwide.

In the three months ended September 30, 2011, ACI’s revenue rose 15.6%, to $112.1 million from $97.0 million a year earlier. Earnings rose sharply, to $10.5 million, or $0.31 a share, from $2.3 million, or $0.07 a share. The company holds cash of $170.8 million, or $4.98 a share.

ACI spends a high 20% of its revenue on research (including $23.8 million in the latest quarter). That will let it keep offering the most advanced transaction-processing software. It is also in a good position to profit as more consumers switch from cash and cheques to credit and debit cards.

The company holds cash of $179.7 million, or $5.36 a share, and is debt-free. The stock trades at 24.1 times ACI’s forecast 2011 earnings of $1.24 a share. That’s reasonable in light of the company’s strong growth prospects.

ACI Worldwide is still a buy.

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