Stock of the Day - January 26, 2009 - NICE

NICE-Systems, Ltd. (NICE)

I’m bringing you a strong, prospective stock that is largely unknown. The company may be able to thrive in the bear market we’ve found ourselves in. NICE Systems (NICE) is an Israeli company that provides businesses with advanced management for customer contact centers and criminal protection. Basically, these guys help companies in two areas: efficiency (including customer relations) and security. Both functions have great demand in our economy. With the recent trend of layoffs, businesses are in need of effective work. Sadly, fraud and a general lack of trust are prevalent on both Main Street and Wall Street. Knowing this, it would be foolish to miss taking advantage of an opportunity to invest in NICE.

NICE provides its services to both private and public sectors. They have 24,000 diverse customers located in 100 countries, varying from American Express to the Federal Communications Commission (FCC). 85 of the Fortune 100 companies are NICE customers. NICE is consistently growing its business, and most recently it locked in two international giants with multi-million dollar deals: Russian Telecommunication provider VimpelCom (VIP) and China’s Alibaba.com, the global leader in e-commerce.

The stock is currently trading at $19.73 and has a 52-week range of $16.11 – $35.87. The stock price took a big hit in late 2008 as investors quickly sold off because of general fear in the technology sector. I believe that the sell-off has left NICE undervalued. NICE has had double-digit quarterly earnings growth percentages for the past three years. The major deals that the company has made on an international scale should provide a good cash flow for early 2009. NICE focuses on saving businesses money, and this should allow them to keep striking deals throughout the rest of the year.

NICE has a market cap of $1.25 billion, which puts it in the small to mid cap range. Small and mid cap companies aren’t as big as the more established large cap businesses, and because of this they carry more risk. Even though the company is not a large cap, it has $252.81 million in cash and no long-term debt. I believe that these numbers diminish the amount of risk that comes with the fact that NICE is a small cap company.

I find it important to note that NICE is an Israeli company. The ongoing conflict between Israel and its neighbors has been a factor for Israeli-based companies and stocks. I believe that by now the effects of the conflicts have already been factored into NICE’s stock price and the downside external risks are limited. Additionally, the fact that NICE is an Israeli company means that it does not work with U.S. dollars. While this may seem obvious and trivial, I believe that the dollar will suffer from a great deal of inflation and devaluation in the short run if Obama’s stimulus package goes through. This would benefit companies, such as NICE, that aren’t based on the U.S. dollar.

Overall, I am in favor of buying NICE. It has a large and powerful customer base, it has a growing demand in our economy, I believe that its stock has already hit or is approaching its low and is now near that number, its earnings are increasing, it has $250 million in cash, and it does not rely on the US dollar. There is reward to be found in the stock because the market has left a well-run company at a discounted price.

NICE is an interesting, dark horse, speculative stock that you should definitely look into and consider adding to your portfolio.

 

-Matt Schwartz

College Trillionaire