After the bell on Monday, investors will get details about another quarter of operations at speech-recognition company Nuance Communications (Nasdaq: NUAN). Here's what to expect.

What analysts say:

  • Buy, sell, or waffle? Of the 13 analysts covering Nuance, 10 give the stock a buy rating, and the other three say hold. In our Motley Fool CAPS community, a huge crowd -- 5,058 investors -- weighs in on the company, collectively rating it a four-star stock (with five stars being best).
  • Revenue. On average, analysts forecast revenue of $200 million, a 48% jump from last year.
  • Earnings. Net income is estimated to jump 31% to $0.17 per share.

What management says:
Nuance continues to barrel down a path of acquisitions to capture share of new markets for its speech products. Thanks to several acquisitions last year -- including Tegic from Time Warner's (NYSE: TWX) AOL and VoiceSignal -- Nuance has kept revenue growing at a 55% annual pace. These additions have helped the company move aggressively into supplying products for top mobile-device manufacturers such as Nokia (NYSE: NOK), Research In Motion (Nasdaq: RIMM), and Motorola (NYSE: MOT).

Wrapping up fiscal 2007, CEO Paul Ricci noted that "In particular, we have witnessed strong demand from customers and partners across our diverse speech markets, improved operational performance through expense discipline and operating leverage, and enjoyed strategic and operational synergies from recent acquisitions."

What management does:
While Nuance produces solid cash flow -- $110 million in operating cash flow in 2007 -- the string of acquisitions and stock dilution associated with them helps keep bottom-line results in the red. For the most part, operating margins continue to improve, however, showing that the mergers are helping Nuance.

Margins

6/06

9/06

12/06

3/07

6/07

9/07

Gross

73.4%

72.2%

71.3%

70.1%

69.9%

69.3%

Operating

1.1%

3.3%

5.5%

6.9%

8.2%

6.5%

Net

(7.3%)

(5.9%)

(4.3%)

(3.9%)

(3.2%)

(2.3%)

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
If Nuance is to stay on its path of growth through acquisitions, the company will have to raise more debt or continue to dilute its share base. Ricci has indicated that he does not want to increase the company's debt load, leaving the second option as the more likely course. This was validated with a recent share offering that was trimmed down but still netted Nuance about $130.5 million, diluting the share base by issuing 7.8 million new shares.

Just what future acquisitions may be on tap for Nuance -- and their size -- is unknown, but the company shows no indication of letting up its equivalent of the land grab in the speech market.