Unveiling NCR (NCR)'s Value: Is It Really Priced Right? A Comprehensive Guide
NCR Corp (NYSE:NCR) has been making headlines in the stock market with a daily gain of 2.55% and a 3-month gain of 14.16%. With an Earnings Per Share (EPS) of 0.46, the question arises: is the stock modestly undervalued? This article aims to provide an in-depth analysis of NCR's valuation and encourage readers to delve into the nuances of the company's financial performance.
Company Introduction
NCR Corp is a software- and services-led enterprise technology provider that runs stores, restaurants, and self-directed banking for its customers. Its software platform runs in the cloud and includes microservices and APIs that integrate with its customers' systems. The company's segments comprise Payments & Network; Digital Banking; Self-Service Banking; Retail; and Hospitality. The current stock price stands at $27.71, and with a GF Value of $35.84, the stock is estimated to be modestly undervalued.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value. It is computed based on historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line on our summary page provides an overview of the fair value that the stock should be traded at.
For NCR (NYSE:NCR), the GF Value estimates that the stock is modestly undervalued. This implies that the long-term return of its stock is likely to be higher than its business growth. If the share price significantly surpasses the GF Value Line, the stock may be overvalued and future returns could be poor. Conversely, if the share price is significantly below the GF Value Line, the stock may be undervalued and future returns could be higher.
Financial Strength of NCR
Investing in companies with low financial strength could result in permanent capital loss. Therefore, it's crucial to review a company's financial strength before buying shares. NCR's cash-to-debt ratio of 0.1 ranks worse than 91.82% of 2751 companies in the Software industry. This suggests a poor balance sheet.
Profitability and Growth
Investing in profitable companies poses less risk, especially those that have demonstrated consistent profitability over the long term. NCR has been profitable 7 over the past 10 years. The company had a revenue of $7.90 billion and Earnings Per Share (EPS) of $0.46 over the past twelve months. Its operating margin is 7.93%, which ranks better than 64.85% of 2785 companies in the Software industry.
Growth is a crucial factor in the valuation of a company. The faster a company is growing, the more likely it is to be creating value for shareholders. The 3-year average annual revenue growth rate of NCR is 5.3%, which ranks worse than 56.69% of 2413 companies in the Software industry.
ROIC vs WACC
Comparing a company's return on invested capital (ROIC) to its weighted average cost of capital (WACC) is another way to evaluate its profitability. Over the past 12 months, NCR's ROIC was 2.05, while its WACC came in at 6.7.
Conclusion
In summary, the stock of NCR (NYSE:NCR) is estimated to be modestly undervalued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 50.25% of 2006 companies in the Software industry. To learn more about NCR stock, you can check out its 30-Year Financials here.
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This article first appeared on GuruFocus.
