UPDATE: Compass Point Upgrades NCR Following Acquisition of Digital Insights Corporation

In a report published Tuesday, Compass Point analyst Douglas Greiner upgraded the rating on NCR Corporation NCR from Neutral to Buy, and reiterated the $40.00 price target. In the report, Compass Point noted, “Yesterday NCR announced the acquisition of Digital Insights Corporation for $1.65 billion and Alaric Systems Limited for $84 million. Both businesses improve the growth and margin profile of the Financial Services segment. The growth outlook for this segment had been our primary reservation. We are now meaningfully more optimistic. Specifically, the acquisition of Digital Insights significantly expands NCR's customer base. Taking a step back, recall, NCR also recently completed the acquisitions of Retalix for $650 million in Retail Solutions and Radiant Systems for $1.2 billion in Hospitality. In aggregate, the impact of these 4 acquisitions has meaningfully transformed NCR's business mix to now look much more like major financial technology players such as Fiserv (FISV-NC) and FIS Global (FIS-NC) as compared to legacy competitor Diebold (DBD-Sell-$24PT). For instance, NCR's software revenue is now expected to reach $1.7-$1.8 billion in 2016 from a base of just $560 million in 2012. With NCR shares currently trading at just 8.6x our updated 2016 Adjusted EPS estimate of $3.95 or at only 7.6x the top end of management's 2016 Adjusted EPS guidance of $4.50 relative to projected 2012-2016 earnings growth of double digits, we see compelling value in the shares.” NCR closed on Monday at $34.19.