Growth stocks are always preferred by investors. One such stock is Nuance (NASDAQ:NUAN), which has been consistently impressive on the stock market. Nuance has performed really well this year with 15% growth in revenue. But it might face weakness due to high executive compensation, an aggressive acquisition strategy, and steep debt. So let us see why investors should buy Nuance and what works against it from an investment point of view.
Nuance is seeing good times as a result of growth in segments such as healthcare, mobile and consumer, enterprise and imaging, thus recording 26% year-over-year growth in bookings in the previous quarter.
Nuance has been impressive in the health care segment with developments in its health care solutions such as Dragon Medical 360, Clintegrity 360, PowerScribe 360 and health care diagnostics that have led to high demand from retail as well as wholesale customers. Nuance is making further advances in this area and expects better revenues in the future as a result of the performance of its products such as computer-assisted solutions and CLU-based solutions.
- Warning! GuruFocus has detected 2 Warning Signs with NUAN. Click here to check it out.
- NUAN 15-Year Financial Data
- The intrinsic value of NUAN
- Peter Lynch Chart of NUAN
With the fast-growing mobile and consumer market, Nuance is seeing great growth opportunities. The company is expecting positive trends in the future with the recent launch of Nina, which is an intelligent virtual assistant for its key customers such as Denso, Fiat, Fujitsu, GM, Hitachi, Kapsys, LG, Nokia, Samsung, Volvo and Yangfeng Visteon. Nina is gaining traction in the market, so Nuance is expecting it to become one of the primary growth drivers.
Nuance is also working on improving its voice recognition technology. Under this, the company has launched an improved version of Dragon Dictate for Mac. This improvement is attracting many customers worldwide. With such new innovations, Nuance is anticipating more better performance from its voice recognition technology, attracting more customers, thereby seeing an increase in the top line in the future.
As the world is moving towards virtualization and digitalization, Nuance is focusing on improving its imaging solutions. It is finding good traction in this segment, providing imaging-based solutions to clients such as ABN AMRO Bank, Canon (CAJ), IKEA, Prince George, Ricoh, Stinson and Tetrapak. With such potential clients and aggressive moves, Nuance is expecting this segment to deliver positive results in the long run.
But Nuance also faces some weakness as a result of Apple, to whom it supplies technology for Siri. Apple has engaged some of Nuance scientists to develop its own voice recognition. This might lead to weakness for Nuance. Though the company is seeing growth in revenue, its earnings are expected to drop this year.
Nuance is taking many concrete steps to maintain profitability. In line with this, the company is investing a lot in developing new technology. With such concrete moves, Nuance is focused on minimizing the negative effects of Apple.
Despite Nuance’s woes, the company is well in-line with its objectives and has some exciting features in its pipeline which are expected to roll out in the future. But losing on Apple and mismanagement might prove problematic. Investors should be cautious while investing in Nuance as this is one investment that could go sour.