April 15, 2008 - Amdocs (NYSE:DOX) is in the business of providing outsourced billing and customer care to the telecom and cable industry. It's not glamorous, high profile, or even high growth, but it is steady, profitable, and a good bet to remain that way for years to come.

The explosion of communications in the past two decades--from Internet to cell phones and digital media--has added greatly to the complexity of phone and cable bills, not to mention the business of Amdocs. This company provides billing and customer management software and services for the telecom industry to the tune of several billion dollars.

Amdocs was already well established in traditional telecom billing, so it came to this game with a strong foothold in this massive, behind-the-scenes "niche" in the communications industry. Now the bundling of various services, not to mention lucrative add-ons and premium services, create a maze of complex billing options, revenue opportunities, and demand for Amdocs.

Amdocs' integrated customer management (ICM) enabling system includes customer relationship management, order management, service and resource management, mediation, and content revenue management products. These applications come in handy as big players in a consolidated telecom industry offer voice, video, data, Internet protocol, broadband, content, electronic, and mobile commerce across wireline and wireless networks as well as cable systems.

It all added up to revenues of $2.84 billion for Amdocs in fiscal year 2007, which ended in September. That figure is expected to hit $3.10 billion in FY2008 and $3.43 billion in FY09. Earnings per share are expected to grow from $2.14 in FY07 to $2.35 in FY08 and $2.64 in FY09.

As consumers increasingly buy ring tones and music for their cell phones, not to mention bundled Internet access and VOIP phone service, Amdocs products and services are behind the scenes enabling everything from managing the orders at the start to deploying resources and billing the customers after.

Amdocs has built on its old relationships with the Baby Bells and other big names like British Telecom, but that's not to say it hasn't faced heavyweight competition in this market. CSG Systems, Convergys, and ADC Telecom are competitors that also sport markets caps in the billions. Amdocs is the largest among these firms, though, with a valuation of nearly $6 billion thanks in part to its impressive growth trajectory.

The company had to lower its revenue guidance slightly last year (though earnings were still as expected), and that combined with the broader market to bring DOX down to $27.59 currently from a peak above $40 last July. DOX has been a stellar performer in past years, so with earnings estimates still charting a solid growth trajectory and the stock price down sharply, it certainly catches the eye as a possible buying opportunity for an otherwise prized stock.

Analysts are forecasting a 13.5% average growth rate for earnings over the next five years. At its current level, DOX is valued at 10.4 times FY08 earnings and less than 2 times sales. Amdocs had its credit rating raised at the end of last month, though with $1.17 billion in cash on the books it's in position to spend as much as borrow. Amdocs announced a deal to acquire Jacobs Rimmel last week for $45 million, and it is a buyer's market these days.

Amdocs may never be a household name, but it is well known among Wall Street pros as a company delivering healthy profits and steady growth. This is a stock worth knowing, and with the stock price below $30 it may attract interest from investors looking to pick up a premium company at a discount.

- James Hale