What software stock is a better buy?
Based in Ra’anana, Israel, NICE Ltd. (NICE) provides enterprise software solutions around the world. The company operates in two segments: Customer engagement; and Financial crime and compliance. In comparison, customer engagement solutions provider Verint Systems Inc. (VRNT) offers a variety of forecasting and planning applications, which enable the work required to meet and exceed customer expectations. Verint is headquartered in Melville, NY
Threats related to data security, especially on cloud-based platforms, continue to threaten the growth of the software market. Nonetheless, the software industry is expected to grow in the coming months due to growing demand from almost all industries as part of their digital transformation efforts and the pursuit of remote work and lifestyles. According to Grand View Research, the global market for enterprise software and services is expected to grow at a 11.3% CAGR between 2021 and 2028.
VRNT has won 10.9% in price in the past three months, while NICE has returned 6.5%. However, NICE’s 8.9% gains over the past month are significantly higher than VRNT’s 2.9% returns. Additionally, NICE is the big winner with 23.2% gains over VRNT’s 1.2% returns in terms of performance over the past six months.
Click here to view our Software Industry Report for 2021
But which of these two titles is the best buy now? Let us know.
On October 8, 2021, NICE announced the release of CXone Fall 2021. Paul Jarman, CEO of NICE CXone, said: âWith the fall 2021 release of CXone, we are bringing advanced capabilities to accelerate digital transformation and enable experiences of Exceptional end-to-end self-service, enabling consumers to get answers to the most complex and complex issues. sophisticated questions from the very first digital entry point.
On September 2, 2021, VRNT finalized the acquisition of Conversocial. In a recent research note from Saddletree, Paul Stockford commented on the acquisition: âVerint is entering this customer service market segment at an ideal time and with the potential to redefine the third-party email client experience while continuing to find new applications for his intelligence. “
Recent financial results
NICE’s non-GAAP revenue increased 16% year-on-year to $ 459 million for its fiscal second quarter, ended June 30, 2021. The company‘s non-GAAP operating profit increased 16.4 % year on year to reach $ 129.60 million, while its -GAAP net income was $ 104.30 million, an increase of 16% year-over-year. In addition, its non-GAAP EPS was $ 1.57, up 14.6% year-over-year.
VRNT’s non-GAAP revenue increased 4% year-over-year to $ 215.63 million for its fiscal second quarter, ended July 31, 2021. However, its non-GAAP operating profit declined by 18. 6% year-on-year to $ 51.79 million, while non-GAAP net income was $ 44.22 million, down 17.9% year-on-year other. In addition, its non-GAAP EPS was $ 0.58, down 25.6% year over year.
Past and expected financial performance
NICE’s revenue and EBITDA have grown at CAGRs of 7.5% and 11.5%, respectively, over the past three years. Analysts expect NICE’s revenue to grow 7% in the next quarter and 11.7% in the current year. The company’s EPS is expected to grow 4.3% in the next quarter and 11.2% in the current year. In addition, its EPS is expected to grow at a rate of 11.5% per year over the next five years.
In comparison, VRNT’s revenue and EBITDA have grown at CAGRs of 2.8% and 7.1%, respectively, over the past three years. The company’s revenue is expected to decline 32.7% in the next quarter and 32.3% in the current year. Its EPS is expected to decline 29.6% in the next quarter and 37.5% in the current year. However, VRNT’s EPS is expected to grow at a rate of 14% per year over the next five years.
NICE’s turnover for the last 12 months is 1.30 times that of VRNT. NICE is also more profitable, with EBITDA and leverage FCF margins of 25.57% and 23.64%, respectively, against 13.34% and 11.76% for VRNT.
In addition, NICE’s respective ROE, ROA and ROTC of 8.21%, 3.89% and 4.95% are higher than VRNT’s 2.14%, 2.65% and 3.39%.
In terms of non-GAAP forward P / E, NICE is currently trading at 45.18x, which is 115.1% higher than VRNT’s 21x. In addition, NICE’s 9.11 before EV / S is 116.4% higher than VRNT’s 4.21x.
So, VRNT is relatively affordable here.
NICE has an overall rating of B, which is equivalent to a purchase in our proprietary POWR rating system. In contrast, VRNT has an overall C rating, which translates to Neutral. POWR scores are calculated by considering 118 separate factors, each factor being weighted to an optimal degree.
NICE has a B rating for growth, which is in line with analysts’ expectations that its EPS and revenue will increase in the coming months. By comparison, VRNT has a C rating for growth, which is in line with analysts’ expectations that its EPS and revenue will decline in the near term.
NICE also has a B rating for stability, which is in line with its beta of 0.17. By comparison, VRNT has a C rating for stability, which is in line with its beta of 0.78.
NICE has a B grade for quality. This is justified given NICE’s 11.97% 12-month rolling net profit margin, which is 91.2% above the industry average of 6.26%. By comparison, VRNT has a Grade C rating, which is in line with its negative 12-month net profit margin, which compares to the industry average of 13.49%.
Out of 162 shares in the Software – Applications sector, NICE is ranked n Â° 14. However, VRNT is ranked # 14 out of 58 stocks in the Software – Business sector.
Beyond what I stated above, we also rated stocks for stability and sentiment. Click here to view all NICE reviews. Also get all VRNT ratings here.
The rapid digital transformation and increasing adoption of advanced software solutions are expected to drive the growth of the software market. While NICE and VRNT are expected to win, we believe it is better to bet on NICE now due to its higher profit margin, better growth prospects and strong financial position.
Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. Check out all the other top rated stocks in the Software – Applications sector here. Also click here for access to all the top rated stocks in the Software – Enterprise sector.
Click here to view our Software Industry Report for 2021
NICE stock was trading at $ 291.96 per share on Wednesday afternoon, up $ 3.98 (+ 1.38%). Year-to-date, NICE has gained 2.97%, compared to a 25.78% increase in the benchmark S&P 500 over the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal’s a passionate interest in the analysis and interpretation of financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach he takes while advising investors in his articles. Following…
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