Pssst. Wanna keep an eye on what people are up to?
It doesn't really matter if you're a government agency or a business; both sectors have need of so-called "actionable intelligence," and that's where Verint Systems (NASDAQ:VRNT) enters the picture. This company offers communications interception and analysis, as well as video security and surveillance software.
For the second quarter, the company intercepted about 24% more revenue because strong security sales offset relatively weaker business intelligence revenue. The company also managed better margins for the period and operating income rose 43% for the quarter. Although the company doesn't offer a cash flow statement with its earnings release, eyeballing the balance sheet suggests that free cash flow is trending positive for the first half of the year.
A majority-owned subsidiary of Comverse Technology (NASDAQ:CMVT), Verint has an appealing balance of customers. Unlike Applied Signal (NASDAQ:APSG), which is almost wholly dependent upon government agency contracts, Comverse actually generates most of its revenue from commercial entities. In addition to clients like the Department of Defense and IRS (and probably the CIA as well), Verint has commercial clients like Motley Fool Inside Value pick Home Depot (NYSE:HD) and Target (NYSE:TGT).
Some investors may see a lot of similarities in NICE Systems (NASDAQ:NICE). The two companies are in similar lines of work, although Verint has a more well-developed video surveillance business. Although Nice Systems has slightly better margins and return on equity, Verint nevertheless trades at a much higher multiple -- even with NICE's run-up of more than 100% over the past year.
I like what Verint does, and I don't see any imminent slowdown in the demand for business intelligence or government intelligence and security. What I don't like is the price. They're certainly not the only fish in this particular sea -- competing with the likes of Honeywell (NYSE:HON), in addition to NICE. Consequently, I'm not sure I see a compelling reason to pay up for this particular stock.
More of our particular brand of business intelligence:
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
