Intrinsic value of NCR Corporation - NCR

Previous Close

$28.64

  Intrinsic Value

$42.69

stock screener

  Rating & Target

buy

+49%

Previous close

$28.64

 
Intrinsic value

$42.69

 
Up/down potential

+49%

 
Rating

buy

We calculate the intrinsic value of NCR stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 3.4

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  6,533
  6,683
  6,855
  7,048
  7,262
  7,496
  7,751
  8,028
  8,325
  8,645
  8,987
  9,351
  9,740
  10,153
  10,590
  11,055
  11,546
  12,065
  12,614
  13,194
  13,806
  14,450
  15,130
  15,847
  16,601
  17,395
  18,231
  19,111
  20,037
  21,010
Variable operating expenses, $m
  5,834
  5,961
  6,105
  6,268
  6,448
  6,645
  6,861
  7,093
  7,344
  7,614
  7,573
  7,880
  8,208
  8,555
  8,924
  9,316
  9,729
  10,167
  10,630
  11,118
  11,634
  12,177
  12,750
  13,354
  13,989
  14,659
  15,363
  16,105
  16,885
  17,705
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  5,834
  5,961
  6,105
  6,268
  6,448
  6,645
  6,861
  7,093
  7,344
  7,614
  7,573
  7,880
  8,208
  8,555
  8,924
  9,316
  9,729
  10,167
  10,630
  11,118
  11,634
  12,177
  12,750
  13,354
  13,989
  14,659
  15,363
  16,105
  16,885
  17,705
Operating income, $m
  699
  723
  750
  780
  814
  851
  891
  934
  981
  1,031
  1,414
  1,471
  1,532
  1,597
  1,666
  1,739
  1,816
  1,898
  1,984
  2,076
  2,172
  2,273
  2,380
  2,493
  2,612
  2,737
  2,868
  3,007
  3,152
  3,305
EBITDA, $m
  1,211
  1,239
  1,271
  1,307
  1,347
  1,390
  1,437
  1,489
  1,544
  1,603
  1,666
  1,734
  1,806
  1,883
  1,964
  2,050
  2,141
  2,237
  2,339
  2,447
  2,560
  2,680
  2,806
  2,938
  3,078
  3,226
  3,381
  3,544
  3,715
  3,896
Interest expense (income), $m
  155
  174
  161
  170
  180
  192
  205
  219
  234
  251
  268
  288
  308
  330
  353
  378
  404
  432
  462
  493
  526
  561
  597
  636
  677
  720
  765
  813
  863
  916
  971
Earnings before tax, $m
  525
  562
  580
  600
  622
  646
  672
  700
  730
  763
  1,126
  1,163
  1,202
  1,244
  1,288
  1,335
  1,384
  1,436
  1,492
  1,550
  1,611
  1,676
  1,744
  1,816
  1,892
  1,972
  2,055
  2,144
  2,237
  2,334
Tax expense, $m
  142
  152
  157
  162
  168
  174
  181
  189
  197
  206
  304
  314
  325
  336
  348
  360
  374
  388
  403
  418
  435
  453
  471
  490
  511
  532
  555
  579
  604
  630
Net income, $m
  383
  410
  423
  438
  454
  472
  491
  511
  533
  557
  822
  849
  878
  908
  940
  974
  1,010
  1,049
  1,089
  1,131
  1,176
  1,224
  1,273
  1,326
  1,381
  1,439
  1,501
  1,565
  1,633
  1,704

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  7,919
  8,101
  8,309
  8,543
  8,802
  9,086
  9,396
  9,731
  10,091
  10,479
  10,893
  11,335
  11,806
  12,306
  12,837
  13,400
  13,995
  14,625
  15,290
  15,993
  16,734
  17,516
  18,340
  19,208
  20,122
  21,085
  22,099
  23,165
  24,287
  25,467
Adjusted assets (=assets-cash), $m
  7,919
  8,101
  8,309
  8,543
  8,802
  9,086
  9,396
  9,731
  10,091
  10,479
  10,893
  11,335
  11,806
  12,306
  12,837
  13,400
  13,995
  14,625
  15,290
  15,993
  16,734
  17,516
  18,340
  19,208
  20,122
  21,085
  22,099
  23,165
  24,287
  25,467
Revenue / Adjusted assets
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
  0.825
Average production assets, $m
  2,038
  2,085
  2,139
  2,199
  2,266
  2,339
  2,418
  2,505
  2,598
  2,697
  2,804
  2,918
  3,039
  3,168
  3,304
  3,449
  3,602
  3,764
  3,936
  4,117
  4,307
  4,509
  4,721
  4,944
  5,180
  5,427
  5,688
  5,963
  6,251
  6,555
Working capital, $m
  470
  481
  494
  507
  523
  540
  558
  578
  599
  622
  647
  673
  701
  731
  763
  796
  831
  869
  908
  950
  994
  1,040
  1,089
  1,141
  1,195
  1,252
  1,313
  1,376
  1,443
  1,513
Total debt, $m
  2,926
  3,090
  3,277
  3,488
  3,721
  3,977
  4,255
  4,557
  4,881
  5,230
  5,603
  6,001
  6,424
  6,875
  7,352
  7,859
  8,395
  8,961
  9,560
  10,192
  10,860
  11,563
  12,305
  13,086
  13,909
  14,776
  15,688
  16,647
  17,657
  18,719
Total liabilities, $m
  7,127
  7,291
  7,478
  7,689
  7,922
  8,178
  8,456
  8,758
  9,082
  9,431
  9,804
  10,202
  10,625
  11,076
  11,553
  12,060
  12,596
  13,162
  13,761
  14,393
  15,061
  15,764
  16,506
  17,287
  18,110
  18,977
  19,889
  20,848
  21,858
  22,920
Total equity, $m
  792
  810
  831
  854
  880
  909
  940
  973
  1,009
  1,048
  1,089
  1,134
  1,181
  1,231
  1,284
  1,340
  1,400
  1,462
  1,529
  1,599
  1,673
  1,752
  1,834
  1,921
  2,012
  2,109
  2,210
  2,316
  2,429
  2,547
Total liabilities and equity, $m
  7,919
  8,101
  8,309
  8,543
  8,802
  9,087
  9,396
  9,731
  10,091
  10,479
  10,893
  11,336
  11,806
  12,307
  12,837
  13,400
  13,996
  14,624
  15,290
  15,992
  16,734
  17,516
  18,340
  19,208
  20,122
  21,086
  22,099
  23,164
  24,287
  25,467
Debt-to-equity ratio
  3.690
  3.810
  3.940
  4.080
  4.230
  4.380
  4.530
  4.680
  4.840
  4.990
  5.140
  5.290
  5.440
  5.590
  5.730
  5.860
  6.000
  6.130
  6.250
  6.370
  6.490
  6.600
  6.710
  6.810
  6.910
  7.010
  7.100
  7.190
  7.270
  7.350
Adjusted equity ratio
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100
  0.100

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  383
  410
  423
  438
  454
  472
  491
  511
  533
  557
  822
  849
  878
  908
  940
  974
  1,010
  1,049
  1,089
  1,131
  1,176
  1,224
  1,273
  1,326
  1,381
  1,439
  1,501
  1,565
  1,633
  1,704
Depreciation, amort., depletion, $m
  512
  517
  521
  527
  533
  539
  547
  554
  563
  572
  253
  263
  274
  285
  298
  311
  325
  339
  355
  371
  388
  406
  425
  445
  467
  489
  512
  537
  563
  591
Funds from operations, $m
  896
  927
  945
  965
  987
  1,011
  1,037
  1,065
  1,096
  1,129
  1,075
  1,112
  1,151
  1,193
  1,238
  1,285
  1,335
  1,388
  1,443
  1,502
  1,564
  1,630
  1,699
  1,771
  1,848
  1,928
  2,013
  2,102
  2,196
  2,294
Change in working capital, $m
  9
  11
  12
  14
  15
  17
  18
  20
  21
  23
  25
  26
  28
  30
  32
  33
  35
  37
  40
  42
  44
  46
  49
  52
  54
  57
  60
  63
  67
  70
Cash from operations, $m
  886
  916
  932
  951
  971
  994
  1,019
  1,046
  1,074
  1,106
  1,050
  1,086
  1,123
  1,164
  1,206
  1,252
  1,300
  1,350
  1,404
  1,461
  1,520
  1,583
  1,650
  1,720
  1,793
  1,871
  1,953
  2,039
  2,129
  2,224
Maintenance CAPEX, $m
  -180
  -184
  -188
  -193
  -198
  -204
  -211
  -218
  -226
  -234
  -243
  -253
  -263
  -274
  -285
  -298
  -311
  -325
  -339
  -355
  -371
  -388
  -406
  -425
  -445
  -467
  -489
  -512
  -537
  -563
New CAPEX, $m
  -37
  -47
  -54
  -60
  -67
  -73
  -80
  -86
  -93
  -100
  -107
  -114
  -121
  -129
  -137
  -145
  -153
  -162
  -171
  -181
  -191
  -201
  -212
  -223
  -235
  -248
  -261
  -274
  -289
  -304
Cash from investing activities, $m
  -217
  -231
  -242
  -253
  -265
  -277
  -291
  -304
  -319
  -334
  -350
  -367
  -384
  -403
  -422
  -443
  -464
  -487
  -510
  -536
  -562
  -589
  -618
  -648
  -680
  -715
  -750
  -786
  -826
  -867
Free cash flow, $m
  669
  685
  691
  698
  707
  717
  728
  741
  756
  772
  700
  719
  739
  761
  784
  809
  836
  864
  894
  925
  959
  994
  1,031
  1,071
  1,113
  1,157
  1,203
  1,252
  1,303
  1,357
Issuance/(repayment) of debt, $m
  -239
  164
  187
  210
  233
  256
  279
  301
  325
  349
  373
  398
  424
  450
  478
  506
  536
  567
  599
  632
  667
  704
  742
  781
  823
  867
  912
  960
  1,010
  1,062
Issuance/(repurchase) of shares, $m
  14
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  -225
  164
  187
  210
  233
  256
  279
  301
  325
  349
  373
  398
  424
  450
  478
  506
  536
  567
  599
  632
  667
  704
  742
  781
  823
  867
  912
  960
  1,010
  1,062
Total cash flow (excl. dividends), $m
  444
  849
  878
  908
  940
  973
  1,007
  1,043
  1,081
  1,120
  1,073
  1,117
  1,163
  1,211
  1,262
  1,315
  1,372
  1,430
  1,492
  1,557
  1,626
  1,698
  1,773
  1,852
  1,936
  2,023
  2,115
  2,212
  2,313
  2,419
Retained Cash Flow (-), $m
  -397
  -18
  -21
  -23
  -26
  -28
  -31
  -33
  -36
  -39
  -41
  -44
  -47
  -50
  -53
  -56
  -60
  -63
  -67
  -70
  -74
  -78
  -82
  -87
  -91
  -96
  -101
  -107
  -112
  -118
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  47
  831
  857
  885
  914
  944
  976
  1,009
  1,045
  1,082
  1,032
  1,073
  1,116
  1,161
  1,209
  1,259
  1,312
  1,367
  1,426
  1,487
  1,552
  1,619
  1,691
  1,765
  1,844
  1,927
  2,014
  2,105
  2,201
  2,301
Discount rate, %
  10.00
  10.50
  11.03
  11.58
  12.16
  12.76
  13.40
  14.07
  14.77
  15.51
  16.29
  17.10
  17.96
  18.86
  19.80
  20.79
  21.83
  22.92
  24.07
  25.27
  26.53
  27.86
  29.25
  30.72
  32.25
  33.86
  35.56
  37.33
  39.20
  41.16
PV of cash for distribution, $m
  43
  681
  626
  571
  515
  459
  405
  352
  302
  256
  196
  161
  130
  103
  80
  61
  46
  33
  24
  16
  11
  7
  5
  3
  2
  1
  1
  0
  0
  0
Current shareholders' claim on cash, %
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6
  99.6

NCR Corporation is a provider of Omni-channel technology solutions that enable businesses connect, interact and transact with their customers. The Company operates through three segments: Software, Services and Hardware. It sells a portfolio of hardware, software and services that combine to provide businesses with solutions. Its portfolio of self-service and assisted-service solutions are designed to allow businesses in the financial services, retail, hospitality, travel and telecommunications and technology industries to deliver an experience to consumers across physical and digital commerce channels. Its offerings include automated teller machines, point of sale terminals and devices, self-service kiosks, Omni-channel platform software and other software applications, and a suite of consulting, implementation, maintenance and managed services. It provides solutions for a range of industries, such as financial services, hospitality, travel and telecommunications, and technology.

FINANCIAL RATIOS  of  NCR Corporation (NCR)

Valuation Ratios
P/E Ratio 13.2
Price to Sales 0.5
Price to Book 2.3
Price to Tangible Book
Price to Cash Flow 4.2
Price to Free Cash Flow 5.7
Growth Rates
Sales Growth Rate 2.7%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -0.9%
Cap. Spend. - 3 Yr. Gr. Rate 0.1%
Financial Strength
Quick Ratio 10
Current Ratio 0.1
LT Debt to Equity 194.6%
Total Debt to Equity 197.9%
Interest Coverage 3
Management Effectiveness
Return On Assets 5.1%
Ret/ On Assets - 3 Yr. Avg. 3.7%
Return On Total Capital 5.8%
Ret/ On T. Cap. - 3 Yr. Avg. 2%
Return On Equity 17.6%
Return On Equity - 3 Yr. Avg. 5.9%
Asset Turnover 0.9
Profitability Ratios
Gross Margin 27.2%
Gross Margin - 3 Yr. Avg. 25.5%
EBITDA Margin 13.4%
EBITDA Margin - 3 Yr. Avg. 9.4%
Operating Margin 9.1%
Oper. Margin - 3 Yr. Avg. 5.3%
Pre-Tax Margin 5.8%
Pre-Tax Margin - 3 Yr. Avg. 2.1%
Net Profit Margin 4.1%
Net Profit Margin - 3 Yr. Avg. 1.4%
Effective Tax Rate 24.3%
Eff/ Tax Rate - 3 Yr. Avg. -22.9%
Payout Ratio 0%

NCR stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the NCR stock intrinsic value calculation we used $6405 million for the last fiscal year's total revenue generated by NCR Corporation. The default revenue input number comes from 0001 income statement of NCR Corporation. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our NCR stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 10%, whose default value for NCR is calculated based on our internal credit rating of NCR Corporation, is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of NCR Corporation.
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of NCR stock the variable cost ratio is equal to 89.4%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for NCR stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.5% for NCR Corporation.

Corporate tax rate of 27% is the nominal tax rate for NCR Corporation. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the NCR stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for NCR are equal to 31.2%.

Life of production assets of 11.1 years is the average useful life of capital assets used in NCR Corporation operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for NCR is equal to 7.2%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $395 million for NCR Corporation - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 118.787 million for NCR Corporation is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of NCR Corporation at the current share price and the inputted number of shares is $3.4 billion.

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