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David Einhorn's Long-Term Position in NCR
Posted by: matsandalex (IP Logged)
Date: November 21, 2012 10:34AM
David Einhorn established a long position in NCR Corporation (NCR) in the third quarter of 2010. The price he paid was under $14 for approximately 8.3 million shares. Einhorn's fund has continued to hold shares of NCR, and yesterday JP Morgan added NCR to their "Focus List."
NCR is focused on ATMs and various other self-service kiosks. At the time when Einhorn acquired the stake he wrote in his shareholder letter, "It trades at 31 times trailing earnings, but in its most recent quarter reported blowout numbers- an 11% increase in revenue and a 142% increase in earnings compared to the same period the previous year- beating analyst estimates for the fourth quarter in a row. The sell-side is catching on, with current earnings estimates implying a forward P/E of 8 and a five-year PEG of 0.6. If the company comes close to those numbers, Greenlight should reap high returns."
Indeed, NCR has executed its business strategy and Greenlight has reaped high returns.
The question is whether NCR has more room to grow over the next few years.
The company now offers mobile payment solutions for three different verticals: retail, banking and restaurants.
The stock currently trades at 9 times this year's earnings of $2.45 per share. Growth is estimated to $2.90 next year. If one were to assign market multiple (PE of 15) for this high-growth stock, the stock would trade at $42.
Guru Discussed: David Einhorn: Current Portfolio, Stock Picks
Stocks Discussed: NCR,