GuruFocus Premium Membership

Serving Intelligent Investors since 2004. Only 96 cents a day.

Free Trial

Free 7-day Trial
All Articles and Columns »

Nuance Is a Good Investment on the Pullback

June 05, 2014 | About:
Rustic Nomad

Rustic Nomad

0 followers

Nuance (NUAN) has been doing good business in the health care, automotive and mobile segments. The company is experiencing decent growth in all the segments and its recent innovations and strategic initiatives, such as its partnership with Apple, should help it do even better in the future. In spite of this, the company’s stock declined around 5%, on account of the correction in the stock market.

Strong Demand

Nuance's demand in the healthcare segment is growing because of its solutions, such as Dragon Medical. Nuance has a solid stand in this sector, with a number of new products in the pipeline. The company is also upgrading its existing products, according to the emerging needs and requirements of the customers.

It has enhanced its PowerScribe 360 platform, which will improve the capability of the solution with online workflow for routing reports to support staff members or back-end service providers. This will help the staff in correcting transcripts and get the data from the reports recorded correctly in electronic health records and insurance claims.

Management believes that the addition of its enhanced its PowerScribe 360 platform will increase its market share in radiology imaging. Currently, it has a market share of around 60% in this area, with a customer base of 1,600 facilities. And the addition of this latest technology will increase its value all the in this segment.

Gaining Traction

Its speech recognition technology, Clintegrity, is expected to do better. Clintegrity is a clinical documentation process that provides an efficient way for clinicians to create complete and compliant clinical documentation. It also helps to improve coding, downstream revenue cycle, and quality reporting processes. According to management, the company recorded a number of important competitive wins for the Clintegrity Solution.

Apart from the healthcare segment, automotive is expected to be another key growth driver for Nuance. To enhance its connected car solution, it had acquired Tweddle Connect last year for $80 million. The management believes that with this new acquisition Nuance could deliver better and smarter connected car experience. Its Dragon Drive application has received some solid response and is being used by some top automakers such as Audi, BMW, Chrysler, Ford, General Motors, Hyundai, Toyota, etc.

A Big Client

Nuance is also trying to gain market share in the mobile segment and it has partnered with the right player to drive growth in this sector. Apple is currently using Nuance’s technology, so as the sales of iPhone increases Nuance will benefit heavily from this market. Moreover Apple is planning to upgrade its current iPhones, with larger screens. If sources are to be believed, we could see iphones in 4.7-inch and 5.5-inch screen sizes.

Thus, with this new up gradation, Apple will have a better chance of capitalizing on the growing market for big screen phones. According to IDC, 20% of all smartphones shipped in China last year were five inches or larger and by 2017, this share is expected to grow to 50%.

Apple also entered into an agreement with China Mobile and its decision to make large screen iPhones was a strategic move as Chinese consumers clearly have a preference for large screen sizes. All this clearly shows the huge market potential for Apple. This in turn reflects a proportionate market share for Nuance since it supplies its technology to the smartphone company.

Conclusion

Although Nuance's performance has not been very attractive over the past one year, with its shares down by around 30% but a turnaround can be expected in the future. The company is keenly focused to release new solutions. Also with growth in mobile, automotive, and healthcare, Nuance seems to be in a good position from a long term perspective and may yield some good return for investors.


Rating: 0.0/5 (0 votes)

Comments

Please leave your comment:


Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK