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DOX - Amdocs Limited


mikazo
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I got this idea from a friend and have seen that a few people on this board are shareholders, based on their post signatures. Thought I'd post a summary and see what others think.

 

Summary over the past 4 years:

 

• Annual revenue of over $3B, steady annual growth of ~5%

• Annual gross profit growth of ~5%

• Annual gross profit margin steady at 36%

• Annual R&D steady at 20% of gross profit

• Annual SG&A steady at ~36% of gross profit

• Annual net income growth between 5-13%

• Annual EPS growth between 8-24%

• Annual Net Income / Revenue steady at 11% (the higher the better)

• Consistently over $1B cash & equivalents

• No long-term debt

• Annual ROA and ROE steady at 8%

• Annual retained earnings growth 15%-19%

• Annual debt-shareholder equity ratio steady at ~0.3

• Annual decrease in shares outstanding of at least 6% each year

• Annual Cap Ex / Net Income steady at 25-32% (the lower the better)

• Annual FCF ~$418M-$452M

• Just recently initiated a dividend

• Under-valued to fair-valued by my estimate

 

Business Overview from 2012 Annual Report:

 

Amdocs is a leading provider of software and services for communications, media and entertainment industry service providers. We develop, implement and manage software and services associated with business support systems (BSS), operational support systems (OSS) and network control product offerings to enable service providers to introduce new products and services quickly, understand their customers more deeply, process orders more efficiently, monetize data and support new business models while controlling costs.

 

We refer to these systems collectively as customer experience systems because of the crucial impact that these systems have on the service providers’ end-user experience. We continue to introduce and enhance products and services that enable service providers to simplify the customer experience, harness and capitalize on the data explosion, stay ahead with new digital services and improve operational efficiencies.

 

Our goal is to supply scalable offerings that provide the functionality and flexibility to service providers that facilitate innovation and enable cost-effective execution. Regardless of whether providers are bringing their first offerings to market, scaling for growth, consolidating systems or transforming the way they do business, we believe that providers seek to differentiate their offerings by delivering a customer experience that is simple, personal and valuable at every point of service.

 

Notable Amdocs Clients:

 

• AT&T

• Bell Canada

• Comcast

• Rogers Communications

• Sprint Nextel

• Telus Communications

• T-Mobile

• Verizon

• Vodafone

• Wind

 

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Ha! Was going to start this thread. Been working on a pitch that I can post here.

 

Basically my take on this is:

 

- They are the biggest player in a niche industry.

- Clients don't usually switch vendors

- They target Tier 1 players, so their customers are doing fine.

- They are only a small part of the cost structure of the end customer, so no reason for customer to switch.

- Telecoms aren't going anywhere.

 

The best thing about them though is that they buy back so much stock. Just pouring their FCF into buybacks. Given that they have a 8-9% FCF Yield with strong return of capital program, it's the classic "equity bond" situation.

 

What concerns me are the smaller rivals like SNCR, which has an epic growth rate, and I'm not sure how much of a threat it presents to DOX. Another concern is the fact that growth is so slow, hopefully the Rest of World business becomes a bigger share.

 

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Ha! Was going to start this thread. Been working on a pitch that I can post here.

 

Basically my take on this is:

 

- They are the biggest player in a niche industry.

- Clients don't usually switch vendors

- They target Tier 1 players, so their customers are doing fine.

- They are only a small part of the cost structure of the end customer, so no reason for customer to switch.

- Telecoms aren't going anywhere.

 

The best thing about them though is that they buy back so much stock. Just pouring their FCF into buybacks. Given that they have a 8-9% FCF Yield with strong return of capital program, it's the classic "equity bond" situation.

 

What concerns me are the smaller rivals like SNCR, which has an epic growth rate, and I'm not sure how much of a threat it presents to DOX. Another concern is the fact that growth is so slow, hopefully the Rest of World business becomes a bigger share.

 

Sorry for stealing your thunder. :D

 

Thanks for the insight!

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The best thing about them though is that they buy back so much stock. Just pouring their FCF into buybacks. Given that they have a 8-9% FCF Yield with strong return of capital program, it's the classic "equity bond" situation.

 

Meant to mention this as well yesterday, from their 2012 annual report:

 

As a general long-term guideline, we expect to allocate roughly half of our free cash flow (calculated as cash flow from operations less net capital expenditures and other) towards growth investments, including mergers and acquisitions, and return the other half to our shareholders through a combination of the dividend program and share repurchases.

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