Each weekday, TheStreet.com Ratings updates its ratings on the stocks it covers. The proprietary ratings model projects a stock's total return potential over a 12-month period, including both price appreciation and dividends. Buy, hold or sell ratings designate how the Ratings group expects these stocks to perform against a general benchmark of the equities market and interest rates.
While the ratings model is quantitative, it uses both subjective and objective elements. For instance, subjective elements include expected equities market returns, future interest rates, implied industry outlook and company earnings forecasts. Objective elements include volatility of past operating revenue, financial strength and company cash flows.
NCR (NCR - Get Report), which makes ATMs and checkout scanners, has been upgraded to a buy. The company maintains a largely solid financial position with reasonable debt levels, attractive valuation levels, a solid stock price performance and an increase in net income. These strengths should outweigh the company's somewhat disappointing return on equity. In July, NCR said second-quarter earnings increased 26% from a year ago to $98 million, or 54 cents a share. Revenue was $1.61 billion, up from $1.53 billion. This stock has surged by 37.84% over the past year (adjusting for the spinoff of the company's Teradata unit that was effective Oct. 1) and it should continue to move higher even though it has already enjoyed a very nice gain in the past year.
NCR had been rated a hold since Oct. 19. That rating was based on pricing data that was not adjusted for the Teradata spinoff, which resulted in the distribution of one common share of Teradata for each share of NCR common stock. After adjusting for the split, the downgrade was reversed and the company's rating was restored to a buy. TheStreet.com Ratings will continue to monitor price action in the stock and this factor's influence on the overall rating.