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Voice Recognition Could Be the Next Tech Trend

Three years ago, Apple Inc. (AAPL ) unveiled its revolutionary digital assistant, Siri. Since then, the speech recognition industry has advanced by leaps and bounds. and what was once science fiction is set to become a $133 billion market by 2017 .

Speech recognition software isn’t perfect yet, but it has evolved tremendously in recent years and has been forecast to increase at a CAGR of more than 22% through 2016 .

And some big players are taking notice of the growth in voice recognition. Since early 2013, activist investor Carl Icahn has been quietly amassing shares of perhaps the most renowned voice recognition stock on the market, Nuance Communications Inc. (NUAN ). Nuance isn’t the only game in town, but it is one of the most well-known.

However, for all its success in the space, Nuance is not the best way to play voice recognition.

Why Is Speech Recognition Technology Such a Big Deal?

For most of us, speech recognition software lies somewhere between a novelty and an occasional convenience. But speech recognition software has made its way from the basement to the big time and has been revolutionizing a host of industries, some of which might just surprise you.

Possibilities for enterprise applications of modern speech recognition are endless, and the technology offers businesses the chance to get a lot more done, a lot faster. Corporations can utilize voice recognition technology to transcribe dictation and other audio recordings. Physicians now enter more accurate and specific notes in patient files.

Banking customers are granted access to their accounts within seconds, as opposed to the usual cumbersome process of validating addresses, phone numbers, and mother’s maiden names. Iain Hanlon, a Barclays executive, told The Daily Mail. “The general feeling is that voice biometrics will be the de facto standard in the next two or three years.”

Is NUAN Good for My Portfolio?

NUAN isn’t the only game in town, but it is responsible for Apple’s iconic Siri, plus acclaimed computer dictation software Dragon. NUAN shares spiked almost 35% during the two weeks after Siri was added to the iPhone in Oct. 2011, peaking just under $30 in Feb. 2012. Unfortunately for Nuance stock investors, shares haven’t seen prices like that since then, and are now languishing around $14 apiece.

In its fiscal 2014 fourth-quarter earnings report. NUAN recorded adjusted earnings of 33 cents per share, up from 30 cents in the year-ago period, and operating margin of 25.9%, up from 25.3% year over year. Quarterly cash flow was also up 2.6% to $95.9 million from $93.5 million in fiscal 2013’s fourth quarter.

NUAN hasn’t treated investors well over the past few years, as much of the turmoil surrounding Nuance stock prices has been due to advancements in speech recognition technology by competitors. Google Inc (GOOG ), for example, responded to Apple’s Siri with a digital assistant of its own, dubbed Google Now. Integrated with other GOOG services like Gmail and Maps, Google Now offered Android smartphone users voice recognition features on par with Siri.

So does NUAN stock still stack up to the competition?