ACI WORLDWIDE $42.71 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.8 million; Market cap: $1.7 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.
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 second quarter of 2012, ACI’s revenue rose 32.1%, to $149.8 million from $113.4 million a year earlier. S1′s $43.1-million contribution was the main reason for the gain.
Without one-time items, earnings fell 21.5%, to $6.6 million, or $0.16 a share, from $8.3 million, or $0.21 . The decline was largely due to the cost of integrating S1. However, the company has completed most of this work, and it now expects the purchase to save it roughly $53 million a year.
ACI holds cash of $149.6 million, or $3.76 a share. Its long-term debt of $348.8 million is a low 20.5% of its market cap.
The company spends a high 23% of its revenue on research. That lets it develop new software that helps it take full advantage of long-term trends in its industry. For example, more consumers are using smartphones to make purchases, and credit and debit cards continue to replace cash and cheques.
The stock trades at a high 35.6 times ACI’s forecast 2012 earnings of $1.20 a share. However, its earnings are forecast to rise to $2.20 a share next year. ACI trades at 19.4 times that estimate. That’s reasonable in light of the company’s strong growth prospects.
ACI Worldwide is still a buy.
