I also gave Nuance Communications, the leading voice tech company, a fairly close look. The recent move over $17 (the stock closed today at $16.78) is rarefied air. The stock hasn't traded at these levels since its IPO in December of 1995.
Past fundamentals numbers from Q1 aren't overly impressive: -4% profit margin, 7% operating margin, return on equity of -3%. On the flip side, NUAN has accelerating year-over-year earnings and a year-over-year quarterly growth rate of 84% ... but debt is heavy and the Co is 85% owned by institutions. Even with that kind of ownership, short interest fairly high at 14%.
At $17, I'd hold it for the long term since it doesn't have strong competition. With earnings out tomorrow, there's no certainty about beating estimates ($.13/share) ... I don't want to get sunk and stuck. I could stick with my favorite A- stocks, which have blown out numbers and I can count on them. Can't say that about Nuance. I really should be adding to my positions in my A- stocks, not putting money towards a Co I don't know well. So I'm going to try and get to know Nuance better. NUAN trades at a forward P/E of 24. Not bad. Leader in its sector, and one of the tech fields that will continue to grow in medical and auto applications. There's talk of being a buyout target, but I don't invest based on that. The question is, is this the quarter when the Co sustains its growth rate. This is not a baby company. After 11 years, voice technology is finally hitting its stride.
I'm going to wait until the morning ... even if NUAN rises another dollar. Dendreon, my black-sheep stock, has its conference call tomorrow. I'm not expecting anything new, not expecting anything but the routine rigamarole from Mitchell Gold, but if any positive announcement comes out, I want some dry powder available.
AAPL has run from 128 to 135 today already in anticipation of tomorrow's media conference about the new and improved iMac. No matter all the thoughts running through my head, best to stay dry through today and tomorrow. It's another two two months until the next earnings reports. The dips will keep coming ... but money starts pouring into tech around this time of year. Even the conservative funds talk on CNBC about going into tech now.
There are investors who avoid small caps at all cost, literally. They've done just fine with large caps and mid caps for a long time. That's why I disturb myself at times by even considering companies that don't have the products that completely dominate their sector. Is Nuance so good that it has killer apps like Apple? Will Dendreon ever, ever get its 9902B Phase III trial done, and done right? More importantly, will DNDN be able to navigate the dangerous waters of the FDA (Pazdur approves Provenge? Does Darth Vader like Yoda?) and hedge funds that have possibly shorted billions of dollars out of the stock and investors?
Nuance is no Dendreon or Hoku Scientific, both of whom are at least a year or more from hitting stride. At Nuance, there are major revenues right now. I'm just not convinced, after NUAN's inconsistent quarter-by-quarter earnings of the past year, that it is the next Garmin or RIMM. I won't be running away from revenues, though.
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