We came across a bullish thesis on NCR Voyix Corp (VYX) on ValueInvestorsClub by TooCheapToIgnore. In this article we will summarize the bulls’ thesis on VYX. NCR Voyix shares were trading at $12.41 when this thesis was published, vs. closing price of $13.78 on Aug 29.
A finance professional at their computer logging into the company’s branded digital banking platform.
NCR Voyix (VYX) is the remaining entity after the spin-off of its ATM business. The company is positioned as a key player in the digital banking, retail, and restaurant technology sectors. It provides cloud-based software solutions and hardware, with digital banking being its standout segment, contributing 26% of pre-corporate EBITDA. This segment is highly profitable, with 40%+ EBITDA margins and high single-digit organic growth, serving over 800 banks and credit unions in the U.S., including nearly 21 million active users. VYX’s retail segment, which accounts for 50% of EBITDA, includes point-of-sale (PoS) software, hardware, and self-checkout kiosks, making it the industry leader in PoS and self-checkout solutions. The restaurant segment, contributing 24% of EBITDA, also has a strong market presence, serving major global chains like Starbucks, McDonald’s, and Chipotle.
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The recent spin-off has created an opportunity due to the market’s mispricing of VYX’s assets. The company’s digital banking segment, despite being a crown jewel with significant growth potential, has never been fully integrated with other segments, leading to a sum-of-the-parts (SOTP) discount. This presents a compelling investment case, as the company is now likely to initiate a strategic review of its digital banking business to unlock its full value.
The strategic review could lead to the sale of the digital banking segment, which is expected to command a valuation significantly higher than the current market price suggests. This potential sale, driven by a newly aligned board and C-suite, with pressure from activist investors, could result in a major rerating of VYX’s stock. The urgency is heightened by a disappointing fourth-quarter performance that saw the company revise its 2024 guidance due to temporary issues like hardware demand pull-forward and a cyberattack. These setbacks, however, have been addressed, and the company is now poised to act decisively.
If the digital banking segment is sold, the proceeds could be used to pay down debt, which would reduce VYX’s leverage to its long-term target of 2.0x EBITDA, removing a significant overhang on the stock. Additionally, the remaining retail and restaurant businesses, which generate substantial free cash flow, could be rerated by the market once the SOTP discount is resolved. The retail business, in particular, is undervalued given its leading position in the PoS and self-checkout markets, and the restaurant business has strong margins and a sticky customer base among top global chains.
Even if the digital banking segment is not sold, VYX offers a compelling investment with a clean 10%+ free cash flow yield for its remaining businesses, which are resilient and growing. The company’s guidance has already been de-risked, making the current stock price an attractive entry point with limited downside risk. In the best-case scenario, a sale of the digital banking segment could double the stock price, offering an exceptional risk/reward skew for investors.
For credit investors, VYX’s existing bonds present an additional opportunity. The potential sale of the digital banking segment could lead to a debt paydown at par, offering attractive returns for bondholders. Overall, VYX represents a unique investment opportunity with multiple catalysts for significant upside.
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Disclosure: None. This article is originally published at Insider Monkey.
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