Headquartered in Ra'anana, Israel, NICE Ltd. (NICE) provides enterprise software solutions worldwide. The company operates in two segments, Customer Engagement; and Financial Crime and Compliance. It offers CXone and a digital-first omnichannel customer engagement platform. On the other hand, Five9, Inc. (FIVN) provides cloud software for contact centers internationally. The company offers a virtual contact center cloud platform that delivers a suite of applications, enabling the breadth of contact center-related customer service, sales, and marketing functions.
Despite data security threats, the surge in the use of call center software among organizations to enhance the customer experience has been helping the call center software industry see relentless growth. In addition, the rise in the Omnichannel communication approach, rapid advancements in customer relationship management, and surge in need for personalized services are fueling the call center software industry’s growth.
The industry is expected to keep growing in the upcoming months owing to the emergence of advanced technologies such as artificial intelligence, predictive analysis, cloud computing, and machine learning. According to Grand View Research, the global contact center software market is expected to grow at a CAGR of 23.2% by 2030. Therefore, both NICE and FIVN should benefit.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
On February 09, 2022, NICE announced a partnership with Etisalat Digital to drive the availability of the CXone platform in the United Arab Emirates. Barak Eilam, CEO, NICE, said, “Our partnership with Etisalat Digital demonstrates NICE CXone’s accelerated international expansion, and we’re excited to work together to bring the benefits of the cloud to agents and customers in the UAE.”
On February 23, 2022, Rowan Trollope, CEO, FIVN, said, “We continue to build out our leadership position while delivering on a massive and barely penetrated opportunity, and we plan to continue investing in key strategic initiatives around AI, product innovation, traction with larger enterprises and global expansion to drive growth in the year ahead."
Recent Financial Results
NICE’s non-GAAP revenues increased 17.6% year-over-year to $515 million for the fiscal fourth quarter ended December 31, 2021. The company’s non-GAAP operating income grew 10.5% year-over-year to $146 million, while its non-GAAP net income came in at $116.70 million representing a 9.2% year-over-year increase. Also, its non-GAAP EPS came in at $1.73, up 7.5% year-over-year.
FIVN’s revenues increased 36% year-over-year to $173.60 million for the fiscal fourth quarter ended December 31, 2021. The company’s adjusted EBITDA grew 26.4% year-over-year to $36.90 million, while its non-GAAP net income came in at $30.10 million representing a 27% year-over-year increase. Also, its non-GAAP EPS came in at $0.42, up 23.5% year-over-year.
Past and Expected Financial Performance
NICE’s revenue grew at a CAGR of 13.6% over the past five years. Analysts expect NICE’s revenue to increase 11.8% for the quarter ending March 31, 2022, and 12% in fiscal 2022. The company’s EPS is expected to grow 11% for the quarter ending March 31, 2022, and 10.1% in fiscal 2022. Moreover, its EPS is expected to grow at a rate of 13.6% per annum over the next five years.
On the other hand, FIVN’s revenue grew at a CAGR of 30.3% over the past five years. The company’s revenue is expected to increase 24% for the quarter ending March 31, 2022, and 24.1% in fiscal 2022. Its EPS is expected to decline 43.5% for the quarter ending March 31, 2022, and 2.6% in fiscal 2022. FIVN’s EPS is expected to grow at a rate of 23.2% per annum over the next five years.
Profitability
NICE’s trailing-12-month revenue of $1.92 billion is significantly higher than FIVE $609.59 million. NICE is also more profitable with an EBITDA margin and net income margin of 23.47% and 10.37%, respectively, compared to FIVN’s negative returns.
Furthermore, NICE’s ROE, ROA, and ROTC are 7.34%, 3.75%, and 4.70% compared to FIVN’s negative values.
Valuation
In terms of forward non-GAAP P/E, FIVN is currently trading at 95.15x, 200.7% higher than NICE’s 31.64x. Moreover, FIVN’s forward EV/EBITDA ratio of 63.24x is 221.2% higher than NICE’s 19.69x.
So, NICE is relatively affordable here.
POWR Ratings
NICE has an overall rating of B, which equates to a Buy in our proprietary POWR Ratings system. On the other hand, FIVN has an overall rating of D, which translates to a Sell. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
NICE has a B grade for Growth, consistent with analysts’ expectations that its EPS will increase in the upcoming months. On the other hand, FIVN has a C grade for Growth, in sync with analysts’ expectations that its EPS will decline in the near term.
Moreover, NICE has a grade of B for Quality. This is justified given NICE's 10.37% trailing-12-month net income margin, 69.7% higher than the industry average of 6.11%. On the other hand, FIVN has a Quality grade of D, in sync with its negative trailing-12-month net income margin compared to the industry average of 6.11%.
Of the 165 stocks in the Software - Application industry, NICE is ranked #23. In comparison, FIVN is ranked #134.
Beyond what I’ve stated above, we have also rated the stocks for Stability, Value, Momentum, and Sentiment. Click here to view all the NICE ratings. Also, get all the FIVN ratings here.
The Winner
The call center software market is expected to keep growing. While NICE and FIVN are expected to gain, it is better to bet on NICE now because of its higher profit margin, better growth prospects, and lower valuation.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the Software – Application industry here.
NICE shares were trading at $224.83 per share on Monday afternoon, down $2.65 (-1.16%). Year-to-date, NICE has declined -25.95%, versus a -9.16% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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