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In this updated coverage research report, we reexamine the information technology sector company Amdocs Limited — DOX 0.00%↑ — to see if it continues to meet QualityValue Investing’s (QVI) Real-Time Stock Picks criteria based on our proprietary checklist analysis of the business’s current wealth and the share price’s present value.
Amdocs | Current Wealth
Value Proposition
Amdocs Limited is a dividend-paying mid-cap stock in the information technology sector’s IT services industry. It was added to the QVI Real-Time Stock Picks on November 4, 2022, at a cost basis of $78.36 per share, adjusted for dividends paid in cash.
Amdocs Limited, through its subsidiaries, provides software and services worldwide. It designs, develops, operates, implements, supports, and markets an open and modular cloud portfolio. The company serves communications, entertainment, and media industry service providers, as well as mobile virtual network operators.
Amdocs Limited, with origins in Israel in 1982, registers in the Island of Guernsey (Channel Islands), and is headquartered in Saint Louis, Missouri, USA.
Economic Moat
Since Morningstar does not cover Amdocs, Quality Value Investing assigns DOX a narrow moat rating based on protection through sticky customer relationships, despite its potentially replicable services.
QVI’s Value Proposition Elevator Pitch for DOX
Amdocs is a provider of cloud portfolios with close to 1,000 relationships with loyal major content producers, communication services, and media providers worldwide. It offers various B2B technology products and services in 5G, automation, cloud, and digital.
QVI’s value proposition rating for Amdocs: Bullish.
Returns on Management
Revenue Growth and Net Profit Margin
As the table below shows, Amdocs’ trailing three-year annualized revenue growth was double-digit positive and aligned with the S&P 500’s top-line growth of 16.60%. In contrast, the company’s positive low-single-digit revenue growth of +1.93% underperformed the broader market’s 18.70% increase for the most recently reported twelve months.
Further down the income statement, Amdocs had a positive double-digit net profit margin from a 35.24% gross margin, underperforming the S&P 500’s net profit of 20.80% from a gross margin of 53.90%.
Returns on Equity and Invested Capital
Amdocs’ senior management produced a return on equity, or ROE, aligned with QVI’s targeted threshold while trailing the S&P 500’s ROE of 55.60%.
Stock buyback programs can elevate ROE. In 2023, Amdoc’s board of directors authorized a modest $1.1 million in share repurchases with no expiration date.
Amdocs’s return on invested capital, or ROIC, aligned with QVI’s threshold while lagging the broader market’s 23.20% return. In addition, the company’s ROIC exceeded its weighted average cost of capital, or WACC, demonstrating that its senior executives are adequate capital allocators (Source of WACC: GuruFocus).
QVI’s business fundamentals rating for Amdocs: Bullish.
Click or Pinch Out to Expand
Next, we’ll examine the company’s enterprise downside risks, the stock price’s present value, including share price downside risks, and the investment thesis, all exclusive to Quality Value Investing’s premium (paying) subscribers.
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Unless noted, all data presented is sourced from Charles Schwab & Co. and Yahoo Finance as of the intraday market and close on December 17, 2024, and is intended for illustration purposes only.
Disclosure: As of the date of this research report, I/we hold no beneficial positions in DOX common shares in our family portfolio. I wrote this report myself, and it expresses my own opinions. I am not receiving compensation for it other than from Substack paid subscriptions. I have no business relationship with any company whose stock is mentioned in this post.
Additional Disclosure: Quality Value Investing by David J. Waldron’s primary ticker research reports are for informational purposes only. The accuracy of the data cannot be guaranteed. Narrative and analytics are impersonal, i.e., not tailored to individual needs nor intended for portfolio construction beyond his family portfolio, which is presented solely for educational purposes. David is an individual investor and author, not an investment adviser. Readers should always engage in independent research or due diligence and consider, as appropriate, consulting a fee-only certified financial planner, licensed discount broker/dealer, flat fee registered investment adviser, certified public accountant, or specialized attorney before making any investment, income tax, or estate planning decisions.
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