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Analysts See Compelling Value In These 3 ‘Perfect 10’ Stocks

Published 21/01/2021, 09:02
Updated 09/07/2023, 11:32

Markets have been rising in recent weeks, buoyed by the prospect of a less confrontational politics. Even better, the vaccination program against COVID-19 is proceeding. There is real hope that 2021 will see a return to normal in short order. Preparing for this, Wall Street’s analysts have been scouring the markets, finding the stocks that are primed for gains with the sea-change in our collective fortunes.

With this in mind, we’ve put together a profile that describes the stocks recommended by a number of 5-star analysts. These are stocks with Buy ratings, and double-digit upsides – but these analysts see them with significantly higher upside potential than the consensus allows. And in a better sign for investors, these three stocks have a ‘Perfect 10’ from the Investing Insights platform.

The platform gives every stock a single-digit score, based on a summing up from 6 separate factors. The factors used are known to correlate with future overperformance; when they align together it’s a strong indication for buyers to consider. Here are the details on three equities to watch.

SS&C Technologies (SSNC)

Based in the state of Connecticut, SS&C Technologies (NASDAQ:SSNC) is a global software company offering a range of SaaS products for the financial industry. SS&C’s products aid in property and wealth management, investors services, and fund administration, along with business process management, client communication, and risk & compliance. The company has a history of growth by acquisition, and made its most recent such move in late 2019, when it spent $88.8 million acquire Algorithmics from IBM.

The value of cloud-based financial management software is obvious in the current environment, and SS&C has clearly benefitted. The company’s share value dropped sharply last winter, at the height of the corona panic, during the short recession of February/March – but since then, the stock has rebounded and is now trading just above pre-collapse levels. Revenues have remained stable through 2020; the Q3 result, of $1.15 billion, is just over the 3Q19 figure.

Covering this stock for BTIG, 5-star analyst Mark Palmer writes, “While shares of SSNC have more than doubled from the COVID-19 pandemic-driven lows they reached last March, we believe the stock remains… especially relative to the stocks of other software-focused FinTech companies with significant recurring revenue… We believe the inexpensive valuation at which SSNC trades is due to investors’ focus on the company’s low organic growth rate…”

Getting into detail, Palmer looks beyond the obvious and gives a quick review of the company’s long-term strategic vision: “[When] we look at SSNC we see a company that uses inexpensive debt to acquire targets with a large portion of recurring revenues in their mixes and making them more profitable by reducing costs and expanding margins; it has done so in acquiring 50 companies during the three-plus decades since its founding. The upshot has been a strong track record of adjusted EPS growth including 31.2% in 2019 and a run-rate of 10.7% through the first three quarters of 2020 amidst a global pandemic.”

Based on those comments, Palmer rates the stock a Buy. His $85 price target indicates in 28% growth for the coming year.

With 12 recent reviews on file, breaking down to 9 Buys and 3 Holds, SSNC gets a Strong Buy rating from the analyst consensus. Shares are selling for $66.46 and the $76.64 average target suggests a 15% one-year upside potential. (See SSNC stock analysis)

SSNC Smart Score

Infosys Limited (INFY)

Next up, Infosys (NYSE:INFY), is India’s second-largest IT company. Based in Bangalore, the company brought in US$13 billion in revenue for fiscal year 2020. Closing out the calendar year, Infosys reported US$3.5 billion, up 6.6% year-over-year. The 5.3% sequential gain was the highest quarter-over-quarter growth in 8 years.

Fueling this growth is a range of services and products, including business consulting, digital market, engineering services, and information tech. Infosys boasts over 1,500 customer companies across 46 countries, and its outsourcing services are in high demand. The share value is up 69% over the past 12 months, far outpacing the overall markets.

Moshe Katri, 5-star analyst from Wedbush, writes of Infosys, “[We] believe the company’s record 6-12 months bookings (majority from new logos), as well as margin leverage from the pandemic-driven WFH model (accelerating offshoring mix), will collectively drive an acceleration in FY22’s revenue growth, as well as an upward reset in INFY’s long-term margin structure...”

He sees the company well-positioned to consolidate its gains going forward, and boosts his price target to $25 to go with his Outperform (i.e., Buy) rating. At current levels, Katri’s target implies a 37% one-year upside.

This one gets a Moderate Buy from the analyst consensus rating, based on 9 reviews breaking down to 4 Buys and 5 Holds. Shares are trading for $18.02. Their $20.75 average price target suggests they’ll grow 15% in 2021. (See INFI stock analysis)

INFY Smart Score

NCR Corporation (NCR)

The last stock on this list is a famous name, almost as well-known as IBM. NCR (NYSE:NCR) made its start building cash registers in the 1880s and has been in the business machine niche ever since, adapting as the industry changed from mechanical devices to modern software. Nowadays, NCR produces a range of business software and payment processing systems, as well as machines – that lineup includes ATMs, barcode scanners, point-of-sale terminals, and self-service kiosks. The relevance of business machines to the modern world is shown by the company’s total revenues; in 2019, the last year with full-year numbers available, NCR brought in $6.92 billion at the top line.

Currently, the company’s revenues are still slightly depressed from the impact of COVID-19. In 3Q20, the top line was down 10% year-over-year, to $1.59 billion, although EPS, at 19 cents per share, was more than double the year-ago value of 8 cents. The stock has rebounded from last winter’s corona recession, and is now trading 6.2% above its pre-corona value.

Earlier this month, NCR announced that it is in talks to acquire Cardtronics (NASDAQ:CATM), an ATM operator. The deal is estimated at $1.7 billion and will bring a global network of 285,000 ATM machines under NCR’s umbrella.

In his note on this stock, RBC analyst Daniel Perlin points out the benefits of the Cardtronics acquisition: “At a high level, we believe that the transaction offers NCR … key positives including: 1) enhancing NCR’s ATM “as a service” solution for banks & fintechs; 2) providing additional transaction monetization and cross-selling opportunities by combining CATM’s network and NCR’s addressable markets of both financial firms & retailers…”

Summing up his position on NCR, Perlin describes his “increased confidence in our belief that NCR is back on its front-foot, pivoting to a growth mode, and is in a [sound] position, both strategically and financially…”

Perlin rates the stock Outperform (Buy), and his $47 price target suggests 38% growth for the next 12 months.

The Strong Buy analyst consensus rating on NCR is unanimous, based on 6 recent Buy-side reviews. The average price target, $43.60, indicates a path to 30% upside from the current trading price of $33.43. (See NCR stock analysis)

NCR Smart Score

To find more ideas for stocks trading at attractive valuations, visit Investing Insights.

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