On Tuesday night, there's a sophisticated earnings report in the works from speech recognition specialist Nuance Communications
What analysts say:
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Buy, sell, or waffle? Ten analysts cover every nuance of Nuance. Four of them think the stock is a "buy" today, and the other six are holding. In our Motley Fool CAPS community, this has been a five-star stock for the last three months, based on input from over 4,000 of our members.
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Revenues. The average forecast calls for $156 million, a 29% improvement over last year's $121 million.
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Earnings. $0.12 of pro forma income per share would satisfy the average analyst, up a smidge from $0.11 per share last year.
What management says:
In the last quarterly report, CEO Paul Ricci pointed out his company's greatest opportunities: "The Company experienced solid growth in each of its business lines and, in particular, enjoyed robust growth in health care and embedded speech." That embedded division is shipping tons of speech recognition and text-to-speech software to car manufacturers like Nissan
What management does:
It's been two years since the last GAAP-profitable quarter from Nuance, and five since the latest positive fiscal year on that line. But free cash flow has always been positive throughout the company's publicly traded history, at least on an annual basis, and the company's operations are running smoother than ever.
|
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
|
|---|---|---|---|---|---|---|
|
Gross |
74.9% |
75.5% |
73.9% |
72.8% |
71.9% |
70.8% |
|
Operating |
2.8% |
5.6% |
6.0% |
9.7% |
11.5% |
13.6% |
|
Net |
(5.4%) |
(5.2%) |
(7.3%) |
(5.9%) |
(4.3%) |
(3.9%) |
|
FCF/Revenue |
1.3% |
3.1% |
9.1% |
10.2% |
14.9% |
16.9% |
And let's not forget the explosive revenue story. Yep, that's an example of accelerating growth, folks.
|
Y-O-Y Growth |
12/2005 |
3/2006 |
6/2006 |
9/2006 |
12/2006 |
3/2007 |
|---|---|---|---|---|---|---|
|
Revenue |
29.2% |
31.8% |
51.6% |
67.2% |
80.5% |
90.5% |
One Fool says:
The sort of divergence in the results you see above can mask the true profitability of a firm until some extraordinary event makes the general investing public sit up and take notice. It's why Bill Mann recommended Nuance to Motley Fool Hidden Gems subscribers twice in the past year and a half, as he saw that cash strength backing an exciting business model and a solid management team. Grab a free 30-day newsletter trial to get the entire scoop, and to find more excellent but undiscovered stocks before they explode into 145% returns like Nuance. (And still, only a handful of financial firms are paying attention.)
As for this earnings report, expect the hidden excellence to continue. Nuance is sticking to its acquisitive habits, as it just took predictive text messaging unit Tegic off of Time Warner's
Nuance is a Motley Fool Hidden Gems pick, and Nissan is a Motley Fool Global Gains recommendation. Palm and Time Warner both have timeshare in the spiffy Motley Fool Stock Advisor neighborhood. Check out any of these services absolutely free for 30 days.
Fool contributor Anders Bylund is a Nissan shareholder who holds no other position in any of the companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure sounds good even through the most robotic of speech synthesizers.
