ACI Worldwide Inc (NASDAQ:ACIW): A Value Investing Analysis

Value investing remains one of the most time-tested approaches in equity markets, focusing on identifying stocks trading below their intrinsic worth while maintaining solid underlying business fundamentals. The strategy emphasizes purchasing securities that appear undervalued by some form of fundamental analysis, all while ensuring the company exhibits healthy financial metrics, sustainable profitability, and credible growth prospects. This disciplined method not only seeks a margin of safety but also avoids value traps by requiring strength across multiple operational dimensions.

ACI Worldwide Inc (NASDAQ:ACIW) emerges as a candidate worthy of examination through this lens. The company, which provides real-time electronic payment solutions to financial institutions, merchants, and billers, demonstrates several characteristics that align with value investing criteria. Its fundamental profile suggests a business that is not only reasonably priced but also operationally sound and competitively positioned within the software industry.

A closer look at the fundamental analysis report reveals why ACIW stands out as a potential value opportunity:

Valuation Strength The company's valuation rating of 7/10 indicates it is priced attractively relative to both industry peers and broader market indices. With an enterprise value to EBITDA ratio that sits cheaper than 88.65% of software companies and a price-to-free-cash-flow ratio outperforming 82.62% of the industry, ACIW appears to offer a good entry point. This is particularly noteworthy given that its forward P/E ratio of 17.19 compares favorably to the industry average of 38.73 and the S&P 500's 22.78. For value investors, these metrics suggest the market may be undervaluing the company's cash generation capabilities and future earnings potential.

Profitability Excellence ACIW's profitability score of 8/10 reflects strong operational efficiency and competitive advantages. The company demonstrates impressive returns on invested capital (12.26%) and equity (18.02%), outperforming approximately 90% and 85% of industry peers respectively. Its operating margin of 20.85% ranks in the top tier of the software sector, while the profit margin of 14.76% shows efficient cost management. These profitability metrics are crucial for value investors as they indicate a business that can generate substantial returns from its operations, supporting the case for intrinsic value exceeding current market pricing.

Financial Health Considerations While the company's health rating of 5/10 suggests some areas for monitoring, several positive factors emerge. ACIW maintains a solid Altman-Z score of 3.55, indicating low bankruptcy risk and outperforming 61.70% of software companies. The debt-to-free-cash-flow ratio of 3.31 shows the company could repay its debts in just over three years using current cash flow levels. However, investors should note the increasing debt-to-assets ratio compared to previous years and a current ratio of 1.48 that, while adequate, leaves limited margin for error. Value investors typically prefer companies with strong balance sheets to weather economic downturns, making this an area worth ongoing attention.

Growth Trajectory The growth rating of 6/10 reflects a balanced picture between historical performance and future expectations. The company has delivered impressive EPS growth of 40.24% over the past year and maintains a 27.49% annual EPS growth rate over recent years. Revenue growth of 11.22% in the last year demonstrates market traction, while analysts project continued EPS growth of 22.02% annually. This combination of historical execution and forward momentum provides confidence that the company can grow into its valuation, a key requirement for value investors seeking both protection and potential appreciation.

The convergence of reasonable valuation, strong profitability, adequate financial health, and credible growth prospects makes ACIW an interesting candidate for investors employing a value-oriented approach. The company's positioning in the electronic payments sector, which continues to benefit from digital transformation trends, provides additional context for its operational strengths.

For investors interested in exploring similar opportunities, additional screening results can be found through this Decent Value Stocks screen, which identifies companies with strong valuation characteristics alongside decent fundamentals across other key metrics.

Disclaimer: This analysis is provided for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any securities. Investors should conduct their own research and consult with a qualified financial advisor before making investment decisions.