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Storm The Castle: NCR (NCR)

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

Trade-Ideas LLC identified NCR ( NCR) as a "storm the castle" (crossing above the 200-day simple moving average on higher than normal relative volume) candidate. In addition to specific proprietary factors, Trade-Ideas identified NCR as such a stock due to the following factors:

  • NCR has an average dollar-volume (as measured by average daily share volume multiplied by share price) of $81.4 million.
  • NCR has traded 1.7 million shares today.
  • NCR is trading at 4.46 times the normal volume for the stock at this time of day.
  • NCR crossed above its 200-day simple moving average.

'Storm the Castle' stocks are worth watching because trading stocks that begin to experience a breakout can lead to potentially massive profits. Once psychological and technical resistance barriers like the 200-day moving average are breached on higher than normal relative volume, the stock is then free to find new buyers and momentum traders who can ultimately push the stock significantly higher. Regardless of the impetus behind the price and volume action, when a stock moves with strength and volume it can indicate the start of a new trend on which early investors can capitalize on. In the event of a well-timed trading opportunity, combining technical indicators with fundamental trends and a disciplined trading methodology should help you take the first steps towards investment success.

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More details on NCR:

NCR Corporation, a technology company, provides products and services that enable businesses to connect, interact, and transact with their customers worldwide. It operates in four segments: Financial Services, Retail Solutions, Hospitality, and Emerging Industries. NCR has a PE ratio of 12.9. Currently there are 3 analysts that rate NCR a buy, no analysts rate it a sell, and 4 rate it a hold.

The average volume for NCR has been 2.3 million shares per day over the past 30 days. NCR has a market cap of $5.6 billion and is part of the technology sector and computer software & services industry. The stock has a beta of 1.09 and a short float of 7.7% with 4.76 days to cover. Shares are up 1.1% year-to-date as of the close of trading on Friday.

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TheStreetRatings.com Analysis:

TheStreet Quant Ratings rates NCR as a buy. The company's strengths can be seen in multiple areas, such as its revenue growth, reasonable valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income.

Highlights from the ratings report include:

  • NCR's revenue growth has slightly outpaced the industry average of 2.3%. Since the same quarter one year prior, revenues slightly increased by 7.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • NCR CORP's earnings per share declined by 16.2% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, NCR CORP reported lower earnings of $2.67 versus $2.88 in the prior year. This year, the market expects an improvement in earnings ($3.01 versus $2.67).
  • In its most recent trading session, NCR has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. Compared to other companies in the Computers & Peripherals industry and the overall market on the basis of return on equity, NCR CORP has underperformed in comparison with the industry average, but has exceeded that of the S&P 500.

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