NEW YORK (TheStreet) -- Nuance Communications (NUAN) stock is gaining by 5.51% to $17.51 in late morning trading on Wednesday, following a rating upgrade to "outperform" from "market perform" at Raymond James this morning.
Raymond James has a $22 price target on Nuance Communications stock.
The firm said it upped its rating on the company based on its belief that Nuance has evolved from an acquisition led growth focus to a focus on improving its internal operations.
Raymond James is also expecting the company's cost-cutting plans to result in above consensus earnings results for next year.
"We view Nuance as a company with many growth businesses and many declining businesses, but in aggregate a reasonably mature top line growth profile, which is now being managed as such. We expect the valuation to improve as recent cost-cutting initiatives bear fruit in the form of EPS upside to consensus (likely in 2016)," the firm said in an analyst note.
Separately, TheStreet Ratings team rates NUANCE COMMUNICATIONS INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:
"We rate NUANCE COMMUNICATIONS INC (NUAN) a HOLD. The primary factors that have impacted our rating are mixed-some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its compelling growth in net income, good cash flow from operations and expanding profit margins. However, as a counter to these strengths, we find that the company's return on equity has been disappointing."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Software industry. The net income increased by 64.1% when compared to the same quarter one year prior, rising from -$39.23 million to -$14.10 million.
- Net operating cash flow has increased to $119.95 million or 37.82% when compared to the same quarter last year. In addition, NUANCE COMMUNICATIONS INC has also vastly surpassed the industry average cash flow growth rate of -17.70%.
- NUAN's debt-to-equity ratio of 0.89 is somewhat low overall, but it is high when compared to the industry average, implying that the management of the debt levels should be evaluated further. Despite the fact that NUAN's debt-to-equity ratio is mixed in its results, the company's quick ratio of 1.57 is high and demonstrates strong liquidity.
- Regardless of the drop in revenue, the company managed to outperform against the industry average of 4.9%. Since the same quarter one year prior, revenues slightly dropped by 0.1%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
- The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Software industry and the overall market, NUANCE COMMUNICATIONS INC's return on equity significantly trails that of both the industry average and the S&P 500.
- You can view the full analysis from the report here: NUAN Ratings Report