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Does NCR (NYSE:NCR) Deserve A Spot On Your Watchlist?

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For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?' Leuz et. al. found that it is 'quite common' for investors to lose money by buying into 'pump and dump' schemes.

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in NCR (NYSE:NCR). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.

View our latest analysis for NCR

How Fast Is NCR Growing?

The market is a voting machine in the short term, but a weighing machine in the long term, so share price follows earnings per share (EPS) eventually. It's no surprise, then, that I like to invest in companies with EPS growth. Impressively, NCR has grown EPS by 26% per year, compound, in the last three years. As a general rule, we'd say that if a company can keep up that sort of growth, shareholders will be smiling.

One way to double-check a company's growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. Unfortunately, revenue is down and so are margins. That is, not a hint of euphemism here, suboptimal.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
earnings-and-revenue-history

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for NCR.

Are NCR Insiders Aligned With All Shareholders?

Like the kids in the streets standing up for their beliefs, insider share purchases give me reason to believe in a brighter future. Because oftentimes, the purchase of stock is a sign that the buyer views it as undervalued. However, small purchases are not always indicative of conviction, and insiders don't always get it right.

We do note that, in the last year, insiders sold -US$677k worth of shares. But that's far less than the US$2.8m insiders spend purchasing stock. I find this encouraging because it suggests they are optimistic about the NCR's future. We also note that it was the President, Michael Hayford, who made the biggest single acquisition, paying US$1.1m for shares at about US$17.71 each.

Along with the insider buying, another encouraging sign for NCR is that insiders, as a group, have a considerable shareholding. Indeed, they hold US$48m worth of its stock. That shows significant buy-in, and may indicate conviction in the business strategy. Even though that's only about 1.0% of the company, it's enough money to indicate alignment between the leaders of the business and ordinary shareholders.

Is NCR Worth Keeping An Eye On?

You can't deny that NCR has grown its earnings per share at a very impressive rate. That's attractive. On top of that, insiders own a significant stake in the company and have been buying more shares. So I do think this is one stock worth watching. What about risks? Every company has them, and we've spotted 3 warning signs for NCR (of which 2 are potentially serious!) you should know about.

The good news is that NCR is not the only growth stock with insider buying. Here's a list of them... with insider buying in the last three months!

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.