ACI WORLDWIDE $54.45 - Nasdaq symbol ACIW

ACI WORLDWIDE $54.45 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.5 million; Market cap: $2.2 billion; No dividends paid) makes software for processing transactions involving credit cards, debit cards, automated teller machines, point-of-sale terminals and interbank payments. Its products also help cut fraud.

In the quarter ended June 30, 2013, ACI’s revenue rose 30.0%, to $208.0 million from $160.0 million a year earlier. That’s mainly due to the contribution from Online Resources Corp., which ACI bought for $126.6 million early this year. The purchase has helped ACI further expand into online banking and bill payments.

Without one-time items, earnings per share dropped to $0.14 from $0.16. The decline was largely due to the cost of integrating acquisitions.

In February 2012, ACI bought S1 Corp. for $540 million. S1 sells transaction software for banks, credit unions, retailers and other payment processors.

Recently, ACI acquired Official Payments Holdings for $109 million. Official Payments processes approximately 20 million payments totalling over $9 billion annually.

ACI holds cash of $107.7 million, or $2.71 a share. Its long-term debt of $604.9 million is a manageable 27.5% of its market cap.

Growth by acquisition adds risk, but all of ACI’s purchases have fit in nicely so far. The company seems well positioned to profit from the rapid expansion of global payment processing.

The company’s outlook is positive, but the stock trades at a high 26.6 times the $2.05 a share ACI is likely to earn this year. It trades at a more reasonable 19.4 times its forecast 2014 earnings per share of $2.80, but any problems with integrating its recent acquisitions could reduce that estimate significantly.

ACI Worldwide is a hold.

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