The recent market volatility continues to open up new opportunities, and one that's looking especially attractive right now is Verint Systems Inc. (NASDAQ: VRNT ), a global leader in Actionable Intelligence solutions. It empowers organizations with crucial data and insights that make for better management decision making. With Verint stock's solutions and value-added services, organizations of all sizes and across many industries can make more informed, timely and effective decisions. The businesses now make up over 80% of the Fortune 100 list.
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The company delivers its solutions through two main divisions: Customer Engagement Solutions and Cyber Intelligence Solutions. Let's take a quick look at each.
The first offers a portfolio of solutions that gathers and shares data across the enterprise, which can then be converted to intelligence to build stronger relationships and better service for customers. Products within this segment include Voice of the Customer, which analyzes customer interactions in voice, text, digital and social media formations, and Workforce Optimization, which improves customer service by sharing insights gained by employees throughout the entire workforce. Customer engagement software is delivered both on premise and in the cloud. This segment accounts for approximately 64% of total revenues.
The second business division is used mostly by law enforcement agencies. VRNT's Network Intelligence Suite gathers insight and intelligence for these agencies by covering critical information from network traffic. Other products can identify suspicious behavior and offer a data mining platform to detect potential threats.
The company also has cybersecurity solutions that identify network attacks. This segment accounts for 36% of total revenues. For both businesses, VRNT uses KANA software, which it acquired from a private equity company for $514 million.
In 2016, management made two important acquisitions: Opinion Lab, which offers feedback solutions and technological depth to the company's Voice of the Customer offerings, and Contact Solutions, which manages mobile customer care solutions.
The company has shown stable growth through most of the decade aided by acquisitions, with revenues increasing from $704 million in the January 2010 fiscal year to $1.13 billion in fiscal 2016.
For the third quarter of 2017, I was very pleased with the company's numbers and forecast. Sales were up 9.1% (8.1% on a constant currency basis), which featured a 6.1% gain in customer engagement (5.3% on a constant currency basis) and a 15.2% gain in cybersecurity revenues (13.7% on a constant currency basis). Management was also confident that growth can continue and is looking for 5% gains in customer engagement revenues and 10% gains in cybersecurity revenue.
EPS in the quarter increased 11.8% from 59 cents to 66 cents, slightly greater than sales growth, as margins expanded despite a 14.8% increase in research and development expenditures. This spending is helping VRNT's top line as the company is driving innovation by automating basic business processes. This will continue into 2018 and is partly to blame for EPS guidance for fiscal 2019 coming in just shy of some of the highest estimates and consensus of $3.10.
However, it is critical in driving the company's future growth.
A Good Start to 2018 for Verint Stock
The stock has gotten off to a good start this year, and I expect it to start firing on all cylinders once its fourth-quarter results are released at the end of March.
Right now analysts are looking for 20.3% growth in earnings and a 7.3% gain in quarterly revenues. If management can meet those estimates, which I expect they will, the numbers should give the shares a nice boost and potentially drive them to new all-time highs around $46.
All in all, this is an excellent niche name that grows in the mid-single digit and trades at a very nice discount. If you're looking for a quality long-term investment in the tech space, VRNT is one to consider.
Hilary Kramer is the editor of GameChangers , Breakout Stocks , High Octane Trader , Absolute Capital Return and Value Authority . She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network and other media.
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