The 1 Stock You Never Saw Coming

Turnarounds are some of the most compelling stories in the market. They’re also some of the hardest to pull off. Corporate reinventions are similar: exciting when they work, painful when they don’t. 

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Finding both those narratives in play at once is unusual. When it’s in an ATM business that filed Chapter 11 just 3 years ago, the prospect of things actually going well seems almost impossible.

However, that’s exactly what’s going on with THIS company.

The business historically sold and serviced cash machines for banks. They still do that, but the story has broadened in quite a meaningful way.

Today, this company is trying to position itself as an automation partner for banks and retailers that need to modernize their physical locations. For banks, that means ATMs, teller cash recyclers, branch automation, and software that helps move routine transactions away from employees and into self-service channels. For retailers, it means point-of-sale systems, self-checkout, checkout software, and AI-enabled tools meant to make stores faster and more efficient. 

And it seems to be working quite well. The reinvention is bearing fruit, and the turnaround is already in progress. 

Do you know the ticker? It’s not a household name, but maybe it should be… Diebold Nixdorf (DBD).

Our in-house quant model rates 4,600 stocks each day on the basis of 115 fundamental factors. Only the stocks that rank in the top 5% are given a Zen Rating of A, and stocks with that distinction have provided an average annual return of 32.52%. Right now, DBD ranks in the top 2% — so it clears even that high bar by a significant margin. It’s also the 4th highest-rated stock (out 176) in the entire App industry, which has an Industry Rating of B.

Each Zen Rating is a composite of 7 Component Grade ratings, which can clue us in on a stock’s particular strengths and weaknesses.

Straight off the bat, we have 4 areas of above-average fundamental strength, and 3 where the results are average.

The valuation relative to the growth prospects is what stood out the most to me. DBD is in the top 9% for Value and the top 13% for Growth. The stock is currently trading at 0.69x sales and at a price-to-earnings growth (PEG) ratio of just 0.69x. To boot, earnings are forecast to grow by 87.33% per year.

Next up, we have Safety and Sentiment — the ratings which track execution, stability, and smart money inflows. For the former, Diebold Nixdorf is in the top 14% — for the latter, it’s in the top 12%. The company has beaten earnings estimates for 5 quarters in a row, and when you look at the actual results, it’s clear that most of those beats were quite significant.

That rounds out the 4 strong areas — what about those pesky C ratings? Well, none of them is a red flag — Momentum is the weakest score, in the top 35%, while Financials are in the top 33% and Artificial Intelligence comes in at the top 30%. There’s definitely room for improvement, but the stock isn’t bad on these fronts by any measure of the imagination.

It’s not often you see a fundamental profile as well-balanced as this. The beat streak demonstrates that the turnaround and reinvention are working. Those EPS estimates and high Sentiment rating clue you in to the fact that Wall Street and smart money still think the stock has room to run.

Now we come to the final order of business — the answer to the question of why now? The main selling point here — the bargain price for everything that you’re getting, it isn’t going to last forever. In fact, it might not even last for long. Diebold Nixdorf shares are up 21% in the past 30 days. The window is closing, and I’m confident that waiting for a better entry price is the wrong move here.

—> Click here to research DBD

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