ACI WORLDWIDE $40.01 (Nasdaq symbol ACIW; TSINetwork Rating: Speculative) (402-334-5101; www.tsainc.com; Shares outstanding: 39.8 million; Market cap: $1.6 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 first quarter of 2012, ACI’s revenue rose 31.6%, to $137.6 million from $104.5 million a year earlier. The gain was largely due to S1’s $22.5-million contribution. Without acquisition-related costs, earnings per share rose sharply, to $0.28 from $0.05.
ACI holds cash of $201.1 million, or $5.05 a share. Its long-term debt of $352.5 million is a low 22.0% of its market cap.
The company spends a high 22% of its revenue on research. That will let it keep offering the most advanced transaction-processing software. This includes switching from cash and cheques to credit and debit cards, as well as mobile payments with smartphones.
The stock trades at a high 31.8 times ACI’s forecast 2012 earnings of $1.26 a share. However, its earnings are forecast to rise to $1.92 a share next year. ACI trades at 20.8 times that estimate. That’s reasonable in light of the company’s strong growth prospects.
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