NCR Corporation (NCR) in Duluth, Ga., is a global corporate technology company that operates retail outlets, restaurants, and self-service banking. It collaborated with Teachers Federal Credit Union (Teachers), one of the nation's largest credit unions, to successfully alter its digital-first approach, earning the coveted Celent Model Bank of the Year Award.
The stock is down 24.1% in price over the past year and 13.7% over the past month to close yesterday's trading session at $34.73. The company failed to meet consensus expectations in its last reported quarter.
NCR’s first-quarter revenue increased by 21% year-over-year to $1.86 billion. Unfortunately, the average analyst anticipated a larger jump, with topline sales nearing $1.93 billion. On the bottom line, NCR’s adjusted profits per diluted share declined 35% to $0.33. Furthermore, company management reduced its mid-point full-year earnings projection to $2.95 per share to $2.95 per share.
Here is what could shape NCR's performance in the near term:
Mixed Financials
NCR's total revenue increased 20.9% year-over-year to $1.87 billion for the first quarter, ended March 31, 2022. However, its income from operations declined 70% from its year-ago value to $33 million. Its net loss came in at $34 million, compared to a $30 million net profit in the prior-year quarter. Its loss per share amounted to $0.28. In addition, its net cash from operating activities declined 75.5% for the three months ended March 31, 2022, to $38 million.
Mixed Profitability
NCR's $960 million trailing-12-months gross cash from operations is 994.1% higher than the $87.74 million industry average. However, its 26% trailing-12-months gross profit margin is 48.6% lower than the industry average of 50.6%. Also, its trailing-12-months ROA, net income margin, and CAPEX/Sales multiple are 91.7%, 92.1%, and 34.7%, lower than their respective industry averages.
Discounted Valuation
In terms of forward non-GAAP P/E, the stock is currently trading at 12.35x, which is 34.6% lower than the 18.89x industry average. Also, its 1.33x forward EV/Sales is 55.3% lower than the 2.97x industry average. Moreover, NCR's 0.59x forward Price/Sales is 80.7% lower than the 3.07x industry average.
POWR Ratings Reflect Uncertainty
NCR has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. NCR has a C grade for Stability and a D for Quality. The stock’s 1.62 beta is in sync with the Stability grade. In addition, the company's mixed financial and mixed profitability is consistent with the Quality grade.
Among the 50 stocks in the D-rated Consumer Financial Services industry, NCR is ranked #35.
Beyond what I have stated above, one can view NCR ratings for Growth, Momentum, Value, and Sentiment here.
Bottom Line
NCR's stock is down 13.6% in price so far this year just as the company has lowered its full-year guidance in its last earnings release. In addition, the stock is currently trading 11% and 14.8% below its 50-day and 200-day moving averages of $39.03 and $40.75, respectively, indicating a downtrend. Therefore, we believe investors should wait for a better entry point in the stock.
How Does NCR Corporation (NCR) Stack Up Against its Peers?
While NCR has an overall C rating, one might want to consider its industry peers, Atlanticus Holdings Corporation (ATLC), Regional Management Corp. (RM), and Ezcorp. Inc. (EZPW), which have an overall B (Buy) rating.
NCR shares were trading at $34.20 per share on Tuesday morning, down $0.53 (-1.53%). Year-to-date, NCR has declined -14.93%, versus a -12.45% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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