Equity Research - NICE Systems Ltd Update Report

Since our initial coverage in June 2011, NICE has sustained healthy revenue growth rates fuelled by several acquisitions as well as moderate organic growth, which in turn is driven by increasing demand for analytics- based solutions. The acquisitions have enabled the company to strengthen its market position and enhance the product portfolio, which are critical factors for the highly competitive technology market. Additionally, NICE has continued to receive industry awards for its solutions, which reiterate its technological and marketing strengths. Overall, management remains optimistic and targets double-digit organic growth rates in the near future.

Although since the beginning of 2011 NICE has committed significant amounts to acquisitions and stock repurchases, its financial position remains solid, with no debt and a large balance of cash and marketable securities.

Our updated valuation, based on a combination of intrinsic DCF-based method and relative valuation techniques, suggests that NICE’s share is currently undervalued, with about one-quarter upside potential. We therefore rate the company as a Buy.

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