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NICE Stock Study (10-11-23)

Posted by on January 5, 2024 at 06:16 | Last modified: October 11, 2023 10:45

I recently did a stock study on Nice Ltd. ADR (NICE) with a closing price of $163.40. The original study is here.

M* writes:

     > Nice is an enterprise software company that serves the customer
     > engagement and financial crime and compliance markets. The company
     > provides data analytics-based solutions through both a cloud
     > platform and on-premises infrastructure. Within customer
     > engagement, Nice’s CXone platform delivers solutions focused on
     > contact center software and workforce engagement management,
     > or WEM. Contact center offerings include solutions for digital
     > self-service, customer journey and experience optimization, and
     > compliance. WEM products optimize call center efficiency,
     > leveraging data and AI analytics for call volume forecasting and
     > agent scheduling. Within financial crime and compliance, Nice
     > offers risk and investigation management, fraud prevention,
     > anti-money laundering, and compliance solutions.

Over the past decade, this medium-size company has grown sales and EPS at 10.3% and 12.9% per year, respectively. Lines are mostly up, straight, and parallel except for a sales dip in ’15 and EPS dip in ’16. PTPM leads peer and industry averages while trending up from 8.8% (’13) to 15.8% (’22) with a last-5-year mean of 14.1%.

Also over the past decade, ROE leads peer and industry averages while trending up from 4.4% (’13) to 8.7% (’22) with a last-5-year mean of 7.9%. Debt-to-Capital is much lower than peer and industry averages with a last-5-year mean of 21.6%.

Quick Ratio is 2.0 and Interest Coverage is 21.8. Value Line assigns an A rating for Financial Strength while M* rates the company “Exemplary” for Capital Allocation.

With regard to sales growth:

I am forecasting conservatively below the range at 8.0% per year.

With regard to EPS growth:

I am forecasting conservatively below the long-term-estimate range (mean of six: 12.9%) at 11.0% per year and using ’22 EPS of $4.00/share as the initial value rather than 2023 Q2 $4.60 (annualized).

My Forecast High P/E is 40.0. Over the past decade, high P/E ranges from 29.9 in ’15 to 107.3 in ’21 with a last-5-year mean of 76.8 (last-10-year median is 47.5). The last-5-year-mean average P/E is 60.3. The most recent three years all seem extreme (96.9, 107.3, 76.5). The last-10-year mean excluding these is 40.8. I am forecasting just below the latter.

My Forecast Low P/E is 32.0. Over the past decade, low P/E ranges from 20.9 in ’15 to 41.2 in ’22 (excluding 70.9 in ’21). The last-5-year mean (outlier excluded) is 36.9 and the last-10-year median is 34.6. I am forecasting below the latter.

My Low Stock Price Forecast (LSPF) of $128.00 is default based on $4.00/share initial value. This is 21.7% less than the previous close and 20.1% less than the 52-week low.

Payout Ratio decreases from 53.9% in ’13 to zero in ’18 where it has remained ever since. I will not forecast a dividend until reason is given to do otherwise [interesting that while MS (see below) has a median value of zero, the mean is 7.2% as 16 studies have values of 6.9% or greater].

These inputs land NICE in the BUY zone with a U/D ratio of 3.0. Total Annualized Return (TAR) is 10.5%.

PAR (using Forecast Average—not High—P/E) of 8.2% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 41 studies (my study and 20 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.0%, 12.2%, 44.3, and 32.0, respectively. I am lower on the first three and equal on the latter. Value Line’s projected average annual P/E of 30.5 is lower than MS (38.2) and lower than mine (36.0).

MS high / low EPS are $7.80 / $4.15 versus my $6.74 / $4.00 (per share). My high EPS is lower due to a lower growth rate. Value Line’s high EPS is $15.25. I am lowest of the three.

MS LSPF of $136.40 implies a Forecast Low P/E of 32.9: greater than the above-stated 32.0. MS LSPF is 2.6% less than the default $4.15/share * 32.0 = $132.80, which results in more conservative zoning. MS LSPF is still 6.6% greater than mine.

My TAR (over 15.0% preferred) is less than the 14.8% from MS. Although the MS sample size is somewhat small, MOS seems robust in the current study.

I track a few different [usually conflicting] valuation metrics. PEG is 1.5 and 2.9 per Zacks and my projected P/E, respectively: the latter significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] per M* is cheap at 0.6. Kim Butcher’s “quick and dirty DCF” prices the stock at 22.0 * [$18.55 – ($0.00 + $0.95)] = $387.20 thus suggesting the stock to be 57.8% undervalued.

NICE is a BUY under $225. With a forecast high price of $270, TAR should meet my 15% criterion around $135/share.

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RHI Stock Study (10-5-23)

Posted by on January 3, 2024 at 06:42 | Last modified: October 5, 2023 12:32

I recently studied Robert Half Inc. (RHI) with a closing price of $73.59.

M* writes:

     > Founded in 1948, Robert Half provides temporary, permanent,
     > and outcome-based staffing for both in-person and remote
     > positions in the finance and accounting, technology, legal,
     > marketing, and administrative fields. Its subsidiary consulting
     > arm, Protiviti, specializes in technology, risk, auditing, and
     > compliance matters. The firm generates most of its sales inside
     > the U.S. and stands as one of the largest specialized firms in
     > the highly fragmented U.S. staffing industry. The firm
     > generates annual revenue of around $7 billion.

Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 4.7% and 11.8%. Lines are mostly up, straight, and parallel with a sales decline in ’20 along with EPS declines in ’16, ’17, and ’20. PTPM leads peer and most industry averages while ranging from 8.3% in ’20 to 12.4% in ’21 (and ’22) with a last-5-year mean of 10.7%.

Also over the past decade, ROE trails peer averages and is about even with the industry despite increasing from 28.0% (’13) to 43.6% (’22) with a last-5-year mean of 38.5%. Debt-to-Capital is lower than peer and industry averages as the company has no debt; the last-5-year mean is 13.8% (e.g. uncapitalized leases, rentals).

Quick Ratio is 1.3. Value Line gives an A+ rating for Financial Strength and M* rates “Exemplary” for Capital Allocation.

With regard to sales growth:

I am discounting the long-term estimate to zero due to all the negative short-term projections.

With regard to EPS growth:

The data duplication concern is in play as two of the five long-term estimates are identical to the two decimal places given. These are CNN Business (FactSet) and Seeking Alpha (S&P Global), which are both at 0.78%. I will ignore because if duplicates, then the study is biased conservatively as I would like.

The mean of five long-term estimates is 1.8%. I will discount this to zero as my forecast. I will use ’22 EPS of $6.03/share [arbitrary] as high EPS and 2023 Q2 EPS of $5.04 (annualized) as [an arbitrary] low EPS in an effort to be conservative.

My Forecast High P/E is 17.0. Over the past decade, high P/E ranges from 17.7 in ’19 to 26.3 in ’14 with a last-5-year mean of 21.7. The last-5-year-mean average P/E of 17.0 is also my forecast and below the entire high P/E range.

My Forecast Low P/E is 11.0. Over the past decade, low P/E has decreased from 16.7 (’13) to 10.8 (’22) with a last-5-year mean of 12.4. I am forecasting near the bottom of the range (only ’22 is lower).

My Low Stock Price Forecast (LSPF) of $55.40 is default based on $6.03/share EPS. This is 24.7% less than the previous closing price and 14.4% less than the 52-week low.

Over the past decade, Payout Ratio ranges from 28.4% in ’21 to 50.4% in ’20 with a last-5-year mean of 34.1%. I am forecasting just below the range at 28.0%.

These inputs land RHI in the HOLD zone with a U/D ratio of 1.6. Total Annualized Return (TAR) is 8.6%.

PAR (using Forecast Average—not High—P/E) of 4.8% is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 43 studies (my study and 9 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and Payout Ratio are 4.2%, 4.9%, 20.9, 13.9, and 34.1%, respectively. I am lower across the board. Value Line’s projected average annual P/E of 18.5 is higher than MS (17.4) and higher than mine (14.0).

Even though my intent is 0%, the website interprets my EPS growth forecast to be 3.7%. Since the initial value ($6.03) is greater than the last quarter ($5.04 annualized), positive growth is calculated. I would affirm the above analysis to still be correct, however, because analyst growth estimates are understood to be projected from the last completed FY.

MS high / low EPS are $6.43 / $3.87 versus my $6.04 / $5.04 (per share). My high EPS is lower due to a lower growth rate and much lower than Value Line’s $7.50. With regard to low EPS, I am puzzled because the largest grouping of MS studies [13, which amounts to 29.5% of the total] uses a low EPS of $2.67 – $2.77 with nine at $2.69. I might argue this to be unreasonably low. 2020 EPS is a downside excursion to $2.70/share (30.8% YOY contraction presumably due to COVID-19). Before that, I have to go back to ’17 to find a lower EPS number ($2.33) and ’15 EPS is exactly $2.69. Why these studies think the company could regress so far is an unanswered question.

MS LSPF of $49.70 implies a Forecast Low P/E of 12.8: less than the above-stated 13.9. MS LSPF is 7.6% less than the default $3.87/share * 13.9 = $53.79, which results in more conservative zoning. MS LSPF is also 10.3% less than mine.

My TAR (>15.0% preferred) is much less than the 14.8% from MS. Despite a small MS sample size, MOS seems robust in the current study.

I track a few different [usually conflicting] valuation metrics. PEG of 3.8 per my projected P/E is “significantly overvalued.” Relative Value [(current P/E) / 5-year-mean average P/E] per M* is slightly undervalued at 0.86. Kim Butcher’s “quick and dirty DCF” prices the stock at 17.0 * [$8.25 – ($2.72 + $0.70)] = $82.11, which suggests the stock to be 10.4% undervalued.

RHI is a BUY under $67. With a forecast high price of $102.70, TAR should meet my 15% criterion around $51/share.

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