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Like other big businesses, most telecommunications firms find it cost effective to farm out development of their customer interface software systems. One of the best known developers of the specialty programs is headquartered in Chesterfield, Missouri.
Amdocs Limited (NYSE: DOX) provides customer relationship management, sales, and billing software used by telecommunications service providers. It also sells publishing software for generating print and online directories and offers a variety of outsourced communications facility management services. Clients include AT&T (NYSE: T), Alltel (NYSE: AT), Comcast (NASDAQ: CMCSA), Nortel Networks (NYSE: NT), Qwest Communications International (NYSE: Q), Sprint Nextel (NYSE: S) and Verizon Communications (NYSE: VZ).
The stock popped on Monday, powering through 50-day and 200-day moving average resistance levels, on rumors of the potential for a bid from private equity. There was clearly interest in June $40 calls that day, implying more than just idle chatter.
The shares have since moved into a bullish "flag" consolidation pattern. Prices frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.
Analysts recommend the issue with six "strong buys", seven "buys" and six "holds". Analysts see a fifteen percent average annual growth rate, through the next five years. The DOX PEG ratio (1.58), Price to Sales (2.88), Price to Book ratio (3.23), Price to Cash Flow ratio (15.99) and Price to Free Cash Flow ratio (25.81) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 88% of the outstanding shares. Over the past 52 weeks, the stock has traded between $32.50 and $41.01. A stop-loss of $32.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.
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