NICE Stock Study (5-23-24)
Posted by Mark on June 26, 2024 at 06:44 | Last modified: May 23, 2024 09:13I recently did a stock study on Nice Ltd. ADR (NICE) with a closing price of $196.58. Previous studies are here and 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 last 10 years, this medium-size company has grown sales and EPS at 11.3% and 10.7% per year, respectively. Lines are mostly up, straight, and parallel except for a sales dip in ’15 and EPS dip in ’16.
Over the past decade, PTPM leads peer and industry averages while trending up from 11.4% (’14) to 19.3% (’23) with a last-5-year mean of 15.4%. ROE leads peer and industry averages while ranging from 6.9% in ’21 to 10.1% in ’23 with a last-5-year mean of 8.3%. Debt-to-Capital is much lower than peer and industry averages with a last-5-year mean of 21.7%.
Quick Ratio is 2.0 per M* and Interest Coverage is 21.8 per Value Line. The former rates the company “Exemplary” for Capital Allocation while the latter gives an “A” rating for Financial Strength.
With regard to sales growth:
- YF projects YOY 14.6% and 11.6% for ’24 and ’25, respectively (based on 16 analysts).
- Zacks projects YOY 14.7% and 11.1% for ’24 and ’25, respectively (7 analysts).
- Value Line projects 12.1% annualized growth from ’23-’28.
- CFRA projects 14.6% YOY and 13.4% per year for ’24 and ’23-’25, respectively.
- M* gives a 2-year ACE of 13.7% per year and projects “mid-teens” 5-year annualized growth in its analyst note.
I am forecasting below the range at 10.0% per year.
With regard to EPS growth:
- MarketWatch projects 17.6% and 15.7% per year for ’23-’25 and ’23-’26, respectively (based on 17 analysts).
- Nasdaq.com projects 16.3% YOY and 14.6% per year for ’25 and ’24-’26 (8, 8, and 3 analysts for ’24, ’25, and ’26).
- Seeking Alpha projects 4-year annualized growth of 13.8%.
- YF projects YOY 20.4% and 14.0% for ’24 and ’25, respectively (16), along with 5-year annualized growth of 14.2%.
- Zacks projects YOY 19.9% and 14.7% for ’24 and ’25, respectively (9), along with 5-year annualized growth of 14.7%.
- Value Line projects 18.2% annualized growth from ’23-’28.
- CFRA projects 21.7% YOY and 17.6% per year for ’24 and ’23-’25, respectively, and a 3-year CAGR of 17.0%.
- M* projects long-term annualized growth of 12.6%.
My 11.0% forecast is below the long-term-estimate range (mean of five: 14.7%). Initial value is ’23 EPS of $5.11/share rather than 2024 Q1 $5.54 (annualized)
My Forecast High P/E is 39.0. Over the past decade, high P/E ranges from 29.9 in ’15 to 107 in ’21 with a last-5-year mean of 76.4, last-10-year median of 46.5, and last-5-year-mean average P/E of 56.1. I am forecasting toward the lower end of the range [’15, ’16 (29.9), and ’17 (34.5) are lower].
My Forecast Low P/E is 29.0. 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 35.8 and the last-10-year median is 31.5. I am forecasting toward the lower end of the range [’15, ’14 (21.9), ’16 (26.8), and ’17 (28.4) are lower].
My Low Stock Price Forecast (LSPF) of $148.20 is default based on initial value given above. This is 24.6% less than the previous close and 0.9% 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/unless payment is reinstituted.
These inputs land NICE in the BUY zone with a U/D ratio of 2.9. Total Annualized Return (TAR) is 11.3%.
PAR (using Forecast Average—not High—P/E) is less than I seek for a medium-size company at 8.3%. 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 101 studies done in the past 90 days (my study and 35 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 12.0%, 12.0%, 50.0, and 35.7, respectively. I am lower across the board. Value Line projects a future average annual P/E of 23.0 that is much less than both MS (42.9) and me (34.0).
MS high / low EPS are $9.15 / $5.09 versus my $8.61 / $5.11 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $20.25 is much greater than both.
MS LSPF of $157.80 implies a Forecast Low P/E of 31.0 versus the above-stated 35.7. MS LSPF is 13.2% less than the default $5.09/share * 35.7 = $181.71, which results in more conservative zoning. MS LSPF is 6.5% greater than mine, however.
TAR (over 15.0% preferred) is less than MS 15.2%. I believe MOS to be robust in the current study.
With regard to valuation, PEG is 1.3 and 2.9 per Zacks and my projected P/E: clearly overvalued by the latter. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.63.
Analyst estimates have climbed over the past seven months but so too has stock price leaving U/D relatively constant.
Study question for the day: why does Value Line have such highly discrepant [and offsetting] average annual P/E and EPS projections? I see this periodically in its analysis.
NICE is a BUY under $195/share. With my forecast high price ~$336, the BI TAR criterion will be satisfied ~$168.
Categories: BetterInvesting® | Comments (0) | Permalink