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Nuance Communications, Inc.
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== Valuation == === Comparable Analysis (Before Acquisition)<ref>https://www.capitaliq.com/CIQDotNet/Comps/Comparables.aspx?companyId=346200&statekey=2e40e3785da849c5bd1f8c40bb66289c</ref> === === Financial Data === [[File:Nuance Comps.png|thumb|1001x1001px]] {| class="wikitable" |Company Comp Set | | | | | | | | | |- |Company Name |Shares Outstanding Latest |Market Capitalization Latest |LTM Net Debt |Total Enterprise Value Latest |LTM Tangible Book Value/Share |LTM Total Revenue |LTM EBITDA |LTM EBIT |LTM Diluted EPS Excl. Extra Items |- |Intel Corporation (NasdaqGS:INTC) | 4,072.0 | 1,90,651.0 | 6,742.0 | 1,98,708.0 | 15.03 | 79,024.0 | 33,874.0 | 22,082.0 | 4.86 |- |Microsoft Corporation (NasdaqGS:MSFT) | 7,496.9 | 22,11,200.8 | (44,995.0) | 21,66,205.8 | 13.55 | 1,84,903.0 | 90,830.0 | 78,628.0 | 9.39 |- |NVIDIA Corporation (NasdaqGS:NVDA) | 2,500.0 | 5,86,925.0 | (9,377.0) | 5,77,404.0 | 7.95 | 26,914.0 | 11,215.0 | 10,041.0 | 3.85 |- |International Business Machines Corporation (NYSE:IBM) | 899.3 | 1,09,131.3 | 47,890.0 | 1,57,116.3 |( 54.84) | 57,351.0 | 12,189.0 | 5,772.0 | 5.21 |- | | | | | | | | | | |- | | | | | | | | | | |- |Nuance Communications, Inc. | 319.4 | 17,735.5 | 855.2 | 18,590.7 |( 2.18) | 1,338.1 | 133.6 | 45.4 |( 0.27) |} {| class="wikitable" |Summary Statistics |Shares Outstanding Latest |Market Capitalization Latest |LTM Net Debt |Total Enterprise Value Latest |LTM Tangible Book Value/Share |LTM Total Revenue |LTM EBITDA |LTM EBIT |LTM Diluted EPS Excl. Extra Items |- |High | 7,496.9 | 22,11,200.8 | 47,890.0 | 21,66,205.8 | 15.03 | 1,84,903.0 | 90,830.0 | 78,628.0 | 9.39 |- |Low | 899.3 | 1,09,131.3 | (44,995.0) | 1,57,116.3 |( 54.84) | 26,914.0 | 11,215.0 | 5,772.0 | 3.85 |- |Mean | 3,742.0 | 7,74,477.0 | 65.0 | 7,74,858.5 |( 4.58) | 87,048.0 | 37,027.0 | 29,130.8 | 5.83 |- |Median | 3,286.0 | 3,88,788.0 | (1,317.5) | 3,88,056.0 | 10.75 | 68,187.5 | 23,031.5 | 16,061.5 | 5.03 |} We can see that in terms of market cap and revenue, Nuance is far below the median and mean of its competitors. === Trading Multiples === [[File:Trading multiples.png|thumb|998x998px]] {| class="wikitable" |Company Comp Set | | | | | | | | |- |Company Name |TEV/Total Revenues LTM - Latest |TEV/EBITDA LTM - Latest |TEV/EBIT LTM - Latest |P/Diluted EPS Before Extra LTM - Latest |P/TangBV LTM - Latest |NTM TEV/Forward Total Revenue (Capital IQ) |NTM TEV/Forward EBITDA (Capital IQ) |NTM Forward P/E (Capital IQ) |- |Intel Corporation (NasdaqGS:INTC) |2.5x |5.7x |9.0x |9.6x |3.1x |2.63x |6.71x |13.44x |- |Microsoft Corporation (NasdaqGS:MSFT) |11.7x |23.3x |27.6x |31.4x |21.8x |10.19x |20.40x |29.86x |- |NVIDIA Corporation (NasdaqGS:NVDA) |21.5x |50.7x |57.5x |61.0x |29.5x |16.67x |38.33x |41.89x |- |International Business Machines Corporation (NYSE:IBM) |2.7x |11.5x |27.2x |23.3x |NM |2.59x |9.34x |12.10x |- | | | | | | | | | |- | | | | | | | | | |- |Nuance Communications, Inc. |13.9x |116.6x |NM |NM |NM |12.38x |43.18x |79.18x |} {| class="wikitable" |Summary Statistics |TEV/Total Revenues LTM - Latest |TEV/EBITDA LTM - Latest |TEV/EBIT LTM - Latest |P/Diluted EPS Before Extra LTM - Latest |P/TangBV LTM - Latest |NTM TEV/Forward Total Revenue (Capital IQ) |NTM TEV/Forward EBITDA (Capital IQ) |NTM Forward P/E (Capital IQ) |- |High |21.5x |50.7x |57.5x |61.0x |29.5x |16.67x |38.33x |41.89x |- |Low |2.5x |5.7x |9.0x |9.6x |3.1x |2.59x |6.71x |12.10x |- |Mean |9.6x |22.8x |30.3x |31.3x |18.1x |8.02x |18.70x |24.32x |- |Median |7.2x |17.4x |27.4x |27.4x |21.8x |6.41x |14.87x |21.65x |} The TEV/Total Revenues multiple reflects whether a company overvalues or undervalues or its stocks or whether its valuation is fair. If a company's theoretical enterprise value is high in proportion to its actual revenue, its ratio is large, meaning it's overvalued. The lower the better, in that, a lower EV/R multiple signals a company is undervalued. From the above data we can come to the conclusion that Nuance is overvalued relative to its competitors. Nuance also has a higher TEV/EBITDA . A high EV/EBITDA means that there is a potential the company is overvalued.The enterprise value to earnings before interest, taxes, depreciation, and amortisation ratio (TEV/EBITDA) compares the value of a company—debt included—to the company’s cash earnings less non-cash expenses. === At the time of Acquisition<ref>https://www.hcinnovationgroup.com/analytics-ai/artifical-intelligence-machine-learning/article/21218486/stock-market-analysts-observers-react-to-microsofts-acquisition-of-nuance</ref> === The day after Microsoft announced its plans to acquire Nuance, Microsoft stock had risen 6 cents to $255.91, while “Nuance stock blasted 16 percent higher to $52.85,” Seitz reported. When a company purchases another, it is common for the stock price of the acquiring company to experience a temporary decline, while the stock price of the target company tends to surge. The decline in the acquiring company's share price is often due to paying a higher price than usual for the target company or taking on debt to fund the acquisition. Microsoft did acquire Nuance for $56.00 per share, which was a 23% premium to the closing price of Nuance on Friday, April 9 2021, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. However, in the long term, acquisitions generally have a positive impact on the acquiring company's share price.
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