Amdocs Retains a Buy Rec

Jul 16, 2008 (Zacks Investment Research via COMTEX) -- DOX | Quote | Chart | News | PowerRating -- We maintain our Buy recommendation and the same valuation target for Amdocs Limited (DOX), a leading provider of CRM and billing software for telecom carriers, as the company will shortly declare third quarter (ended June 30) fiscal 2008 financial results. We believe the long-run fundamentals for the company remain strong as Amdocs continues to benefit from large transformation projects at many telephone carriers requiring converged and consolidated network solutions. Amdocs maintains a healthy financial position and strong order backlog. The current valuation of the stock, near its 52-week low, is also considered to be more favorable. However, possible near-term business fluctuations and the announced reduction of subscribers at one of its major customers, Sprint-Nextel, may offset Amdocs revenue as it depends on the number of subscribers served. Also, the company marginally reduced its full fiscal 2008 financial outlook. Amdocs is currently trading at 12.9x our estimate for fiscal year 2008 earnings. This is at a premium to the peer group average but a discount to the forward S&P 500 average. With respect to other selected valuation metrics, the stock is also trading at a premium over its peers. However after adjusting $3.33 net cash/diluted share, Amdocs is trading at a modest 11.37x P/E to our fiscal 2008 earnings estimate. We set a six-month target price of $35 based on a net of cash forward P/E ratio of 14.27x to our estimate for fiscal 2008 earnings plus $3.33 net cash/diluted share. Nalak Das contributed to the report. Read the full analyst report on DOX

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