Seeking Alpha: Is NCR Still A Sheep In Wolf's Clothing?

NCR (NYSE:NCR) has generally told a good story over the years, pointing to the emerging market growth opportunities in ATMs, the growth offered by branch transformation and increased service offerings in the U.S. banking sector, and the opportunities in retail and hospitality, particularly from software. It hasn't really worked out, though. The company's revenue has been growing modestly on a constant currency basis, and although the company has made strides with its free cash flow generation, the shares are down about a quarter from when I last wrote on them about two years ago.

I don't disagree that there are growth opportunities in the markets that NCR serves that could underpin mid single-digit or higher long-term growth. The problem, in my view, is that companies like Oracle (NYSE:ORCL), VeriFone (NYSE:PAY), Ingenico (OTCPK:INGIY), and Global Payments (NYSE:GPN)/Heartland Payments (NYSE:HPY) have increasingly blurred the lines in the hardware and software spaces within retail and hospitality and I'm concerned that NCR just doesn't have the vision and the portfolio to really leverage those opportunities.

The upcoming Investor Day could be an opportunity for the company to lay out some bold transformative strategies for the company, but I'm very concerned that it'll be more of the same, (a lot of promises, but weak delivery) and I just don't see a reason to mess around with a company that has had numerous opportunities to reestablish its growth credibility.

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Is NCR Still A Sheep In Wolf's Clothing?

Seeking Alpha: NCR Corp. Still Undervalued, But Not Helping Its Cause

When I last wrote on NCR (NCR) in December of 2013, I thought that NCR's acquisition of Digital Insight was a good move, but that ongoing skepticism about the company's pension status, FCF conversion, and ability to drive synergies across the business would likely keep the stock from realizing its significant upside over the next year.

With the shares basically flat in the five months since (and likely down once trading opens on Wednesday), I can't say I'm disappointed or surprised with the company's performance. The key to the NCR story remains its comprehensive hardware and software toolbox for financial institutions, its growth prospects within the retail and hospitality industries, and its conversion toward higher-margin software sales. NCR still gets the opposite of the benefit of the doubt from the Street and still offers attractive upside from these levels, though management has to start generating better FCF conversion and guidance to realize that upside.

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NCR Corp. Still Undervalued, But Not Helping Its Cause

Seeking Alpha: VeriFone's New Management Says The Right Things, But Execution Is Key

Say what you like about sell-side research, it can at least tell you which way the wind is blowing about a particular stock. When it comes to VeriFone (PAY), analysts seem eager to forgive-and-forget and buy into the story of a strong turnaround in the making. Given how the stock has been performing, I'd say that investors are taking a similar viewpoint.

I still have my doubts. I like the hire the company made for the CEO position, and I've liked what I've heard from him so far in terms of strategy, but two troubling facts remain. First, mobile payment options are changing the electronic payments world. Second, Ingenico (OTCPK:INGIY) as capitalized on VeriFone's missteps to gain share, and has no plans to let up. I've substantially upgraded my growth expectations in light of the new CEO, but even with that I don't see these shares as a must-own on a GARP basis.

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VeriFone's New Management Says The Right Things, But Execution Is Key

Seeking Alpha: NCR Hits The Throttle On Its Transformation Plan

Short of a name change, it's likely going to take a long time before investors stop thinking of NCR (NCR) primarily as a manufacturer of ATMs and retail self check-out kiosks. After all, that's what we all see on a day to day basis when we go to the bank or a store. There's a great deal more to the story, though, as NCR has invested significantly in its services and software capabilities.

With the acquisitions of Digital Insight and Alaric Systems, announced on Monday evening, NCR has significantly accelerated that transition towards a service and software-oriented company. The deals are expensive in terms of multiples, but the potential from operating synergies, cross-selling, and addressable market expansion make them worthwhile. While there are areas of sluggishness in the financial and retail spaces that threaten near-term performance, I believe these shares of NCR remain meaningfully undervalued in a market that offers few of those opportunities.

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NCR Hits The Throttle On Its Transformation Plan

Seeking Alpha: Wall Street Too Eager To Believe In VeriFone's Turnaround

I have thought for some time now that Wall Street badly wants to believe that VeriFone (PAY) can turn around its business, and the reaction to the company's third quarter earnings backs that up. VeriFone went out of its way to lower the hurdle for this quarter - to a point where a gopher could clear it - but pre-market indications on the stock seem to suggest that this was a meaningful beat for the company. Suffice it to say, I'm not a VeriFone bull. I believe the right CEO hire could make a real difference here, but even a 10% growth estimate doesn't point to much value.

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Wall Street Too Eager To Believe In VeriFone's Turnaround

Investopedia: NCR Transforming, But The Street Seems Up To Speed

NCR (NYSE:NCR) has already gone a long way toward transforming itself from a tired, slow-growing manufacturer of ATM and point of sale (POS) hardware to a more dynamic payments technology company. In addition to addressing client needs for more front-end productivity, NCR has really augmented its faster-growing software and service operations. The only downside to the story is valuation, as today's valuation already assumes that these moves will meaningfully upgrade the company's future cash flows.

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http://www.investopedia.com/stock-analysis/082013/ncr-transforming-street-seems-speed-ncr-dbd-ibm-pay.aspx

Seeking Alpha: VeriFone Takes A Big Swing

While investors in VeriFone (PAY) may feel that the board of directors has tolerated operational mistakes for too long already, a far more definite move was made on Monday. After the close, the company announced that CEO Doug Bergeron is stepping down immediately from his role as CEO and leaving the board of directors. This move certainly brings closure to an executive tenure that had recently turned sour, but it also increases the uncertainty of the company's near-term trajectory. On a longer term basis there would seem to be value in the shares, but there's an uncomfortable amount of hope in that thesis.

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VeriFone Takes A Big Swing

Seeking Alpha: VeriFone Now A Falling Knife

Questioning the valuation of a growth stock is a good way to fill up your inbox with hostile emails, but VeriFone (PAY) is offering up a case study in why valuation always matters. While the company is still growing, and still has an attractive global market opportunity, multiple missteps have led to a one-two punch of lower estimates and substantially lower multiples on those estimates. Although these shares may finally be resetting to a point where the valuation makes it appealing, management is going to have a long road back to reestablishing credibility with the Street.

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VeriFone Now A Falling Knife

Investopedia: VeriFone Loses The Tailwind Again

Something is going on with VeriFone (NYSE:PAY), and it's not good. Not only is the stock well off its highs, but whatever momentum that the company had gained since its fiscal third quarter miss is likely to evaporate with another miss. Although I don't think VeriFone is a fundamentally flawed business, it may well be transitioning away from that phase of its corporate life where investors look past almost any bad news in the pursuit of growth.

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http://www.investopedia.com/stock-analysis/2012/VeriFone-Loses-The-Tailwind-Again-PAY-INTU-NCR-BKS1214.aspx

Investopedia: NCR Accelerates Its Diversification, But At A High Cost

Build-versus-buy is a familiar debate for most companies, and many ultimately decide to do both. That has been the case with NCR (NYSE:NCR), as this company continues to transition and diversify away from its historical reliance on ATM and point of sale (POS) hardware. The November 28 announced deal for Retalix (Nasdaq:RTLX) is going off at a high price for NCR, but it's a logical deal for the company, and past experience with the Radiant transaction should give investors a little more confidence in the long-term worth of this move.

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Investopedia: VeriFone Turning Into A Noisy Growth Story

Seemingly no growth story can go on for too long without seeing some doubts and controversy creep into the name. In the case of VeriFone (NYSE:PAY), it seems like the bears and bulls are increasingly at loggerheads. Bulls point to the ongoing upgrade and sales potential at traditional points like gas stations and retail stores, as well as the opportunity in the evolving mobile payment market. Bears argue, though, that organic sales growth isn't as strong as it seems, the upgrade cycle may be slow to develop and mobile could be as much a threat as an opportunity.

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http://stocks.investopedia.com/stock-analysis/2012/VeriFone-Turning-Into-A-Noisy-Growth-Story-PAY-V-MA-MCRS-NCR0529.aspx

Investopedia: NCR An Interesting Mix Of Growth And Stability

Increasing automation is a fact of life, and NCR (NYSE:NCR) has a central role in making that happen. Dealing with ATMs instead of tellers is a long since accepted practice, and customers have either chosen or been forced to accept automated kiosks in lieu of working with human workers in a variety of other industries. Although NCR isn't likely to post torrid growth, the overall growth and value balance looks interesting.


ATMs a Solid Base
To a large extent, the North American ATM market is a replacement market where Diebold (NYSE:DBD) and Wincor Nixdorf have built a fairly lucrative industry with huge barriers to new entrants. For related reading, see The Ins And Outs Of Bank Fees.


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Investopedia: VeriFone Not Lacking In Growth Or Confidence

Consumers may be more reluctant to open up their wallets at retailers these days, but retailers and service providers are still quite willing to spend their own money on technology to make it easier for consumers to spend. To that end, payment solutions provider VeriFone (NYSE:PAY) is continuing to see excellent growth and momentum, and management is not lacking in confidence about the company's prospects.


A Strong Third Quarter
VeriFone has a solid reputation for surpassing analyst estimates and this quarter was no exception. Revenue jumped 21% from last year (8% sequentially), and the company beat the midpoint of analyst estimates by about 6%. Business in the U.S. was weak (on difficult comps), as North American sales fell 1% from last year. Growth was quite strong everywhere else, though - reported results from Europe jumped 56%, while Asia and LatAm grew 42% and 23%.

After the quarter ended, VeriFone completed its acquisition of Hypercom. Hypercom's last 10-Q (ended June 30, 2011) showed revenue of over $119 million and growth of 15% (though down about 13% in the Americas), but investors should remember that divestitures mean that the company will not reap 100% of that former business.



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Investopedia: NCR Buys Its Way Into Another Vertical

Sometimes, organic growth just takes a little too long, or costs a little too much. NCR (NYSE:NCR), a maker of a variety of ATMs, self-service kiosks and point-of-sale terminals, announced that it has reached a deal to acquire Radiant Systems (Nasdaq:RADS) in an all-cash deal. Assuming this deal goes through to completion, NCR will significantly bolster its hospitality market presence and give it a third major industry group alongside finance and retail. 

NCR's Deal  
NCR announced that it will be acquiring Radiant Systems in a cash deal that values Radiant at $28 per share - about a 30% premium for Radiant shareholders. At a deal value of $1.2 billion, Radiant is going out for a little bit more than three times the forward revenue estimate and a trailing EV/EBITDA ratio around 15. That's a pretty healthy valuation, relative to Radiant's historical multiples, not to mention its likely forward free cash flow. (For related reading, see Taking Stock Of Discounted Cash Flow.)

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http://stocks.investopedia.com/stock-analysis/2011/NCR-Buys-Its-Way-Into-Another-Vertical-NCR-RADS-IBM-DBD-PAR0713.aspx

Investopedia: VeriFone Makes Its Skeptics Pay

As I have said more than once, there is nothing more dangerous than trying to apply conservative valuation principles to the popular stock of a fast-growing company. VeriFone (NYSE:PAY) is a good example, as this well-run financial services company continues to find lucrative expansion opportunities and validate a premium valuation. 

First Quarter Growth Continues Apace
VeriFone's fiscal first quarter was a story about a strong company getting stronger. Revenue rose 27% from last year's level and 3% sequentially. Interestingly, the company's business was strongest in its largest (and most developed) market, as sales in U.S./Canada rose 43%, while sales in Asia rose 12%.

The company also continues to leverage its revenue growth into better profitability. Gross margin expanded by about two points from the year-ago level whether one looks at GAAP or non-GAAP numbers. While VeriFone is not holding back from spending more on R&D and sales/marketing, the company nevertheless delivered 82% operating profit growth, or 48% growth for those who prefer the non-GAAP numbers. While some may think it is worth noting that the company reported less operating cash flow than net income this quarter, quarter-to-quarter cash flow analysis often causes more problems than it solves. 


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Investopedia: Coinstar - Maybe Not As Doomed As You Think

The doomsayers will be out in force on Coinstar (Nasdaq:CSTR) over the next few days. The company announced a significant miss for the fourth quarter, took down guidance for 2011 by a significant amount and acknowledged troubles with both inventory management and their assessment of the market. 

Queue the write-ups of "Coinstar is doomed!"

But maybe that is too hasty. Coinstar has problems, yes, and a difficult transition to come, but it may be a bit premature to grab the shovels and reserve a hearse.

Studios Sink Coinstar's Holiday
As Coinstar's management tells the tale, the underperformance in the fourth quarter can be laid at least in part at the feet of movie studios belonging to the likes of Time Warner (NYSE: TWX) and News Corp (NYSE:NWS).

Desirous of preserving their ridiculously profitable video-on-demand/pay-per-view and DVD sales, these studios basically forced Coinstar into accepting a 28-day window of exclusion; Coinstar cannot load its Redbox DVD rental kiosks with these new releases for 28 days. Given that the Redbox business model is predicated at least in part on impulse rentals of new movies, that's a serious blow, and that fed into the lower-than-expected same-store sales of 12.5% for the period.   

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Has Ingenico Done VeriFone A Favor?

VeriFone (NYSE:PAY) is a curious company. It is about to operate in a duopoly that arguably should not exist - who would have thought that there would be just two providers of electronic payment solutions for credit, debit and gift card transactions? It also happens to carry a rather rich multiple. 

What makes the situation even more interesting today is that its sole pure-play rival may have inadvertently done the company a major favor. If rumors and numerous press accounts are accurate, Ingenico (perhaps under some pressure from the French government) rejected a buyout bid from American conglomerate Danaher (NYSE:DHR).    

The Deal That Wasn't 

According to those same sources, Danaher offered $1.9 billion, or about 28 euros per share, for Ingenico. Although that deal would not have represented much of a premium to the stock's recent trading price, these shares were below 16 euros before the summer began. Then again, a $1.9 billion bid would not represent all that much of a premium in terms of multiples either. Based on analyst expectations, that deal would represent only 1.6 times sales and less than 10 times EBITDA - relatively meager given that VeriFone trades at approximately twice those multiples.

    
Not Just About the Money? 
If reports are to be believed, it was not just the valuation of the deal that was an issue. Apparently, the French government sees Ingenico as some sort of "essential" company to France's electronics industry and is not willing to see a foreign company acquire it.

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