Jack Henry & Associates

Jack Henry & Associates (JKHY) is a stock that frequently shows up in screens for quality growth stocks and is another company to consider buying. Using NAIC criteria, JKHY is a buy up to $23.10 (current price is $18.52). Projected average return over the next 5 years is 18.3%. See annotated stock selection guide for more details. The SSG assumes a 13.5% revenue growth based on Value Line.

Jack Henry & Associates provides integrated computer systems and processes ATM and debit card transactions for banks and credit unions. It describes itself as:

A technology provider for the financial industry. That’s the simplest way to describe what we do. But it hardly describes what Jack Henry & Associates is really about. We’re about solutions and support. We’re about building relationships and making things work. We’re about doing the right things for our customers, no matter what. It began as a vision, and it’s become our tradition.

A substantial amount of JKHY’s revenue, about 60%, comes from recurring sales. The company has a strong customer focus. Its several corporate aircraft are used to transport customer support teams — not company executives. Great concept!

Value Line rates JHKY’s financial strength “B++” and earnings predictability as 75 (out of 100). Its RQR quality rating is 61 — a little lower than the Moose Pond Investors portfolio average. Given the high projected average return and the that fact that JKHY is a medium size company, the lower quality rating is acceptable. Morningstar gives JKHY a rating of five stars and a wide economic moat. It estimates fair value at $22 assuming a growth in revenue of 11.5%. (Lowering the sales growth rate in the SSG to 11.5% results in a PAR of 16.3%).

Bottom Line. JKHY is a strong buy up to $23.10.