As technology progresses, sometimes it amazes me at how fast things become obsolete. I have two teenage sons. When they were pre-teens, Microsoft’s (Nasdaq: MSFT) Xbox game console was all the rage. New releases of ActivisionBlizzard’s (Nasdaq: ATVI) “Call of Duty” series were pre-ordered and eagerly anticipated.

#-ad_banner-#It wasn’t that long ago, but it almost seems the gaming console platform is dead and gone, at least in our house. Most gaming done by my kids is handheld, whether on smartphone or tablet. When I hear Xbox generated gunfire and explosions coming from the back, I figure that they must be feeling nostalgic.

With the rise of digital payment systems, I get a bit nostalgic at times when it comes to physical banking, whether it’s making a deposit in the drive through of an actual branch, writing a check, or even using an ATM. Birthed in the mid 1960’s, the ATM has become a staple of the modern convenience life. However, it could go the way of the pay phone.

So what does the future hold for Diebold, Inc. (NYSE: DBD), one of the world’s leading manufacturers of ATMs? Is the stock worth owning?

On a price basis, the stock is attractive at these levels. At around $28, shares trade at an intriguing 26% discount to their 52-week high.  Furthermore, although I am definitely not a wiggle reader, from a technical standpoint it also appears that the stock is breaking out of a double bottom of lows it hasn’t seen in four years.

The fundamentals are a different story. Though they are far from a train wreck, there are nevertheless some challenging headwinds at both the macro and company specific levels.

Recently, earnings per share (EPS) have not been stellar. Full year 2015 results came in at 93 cents per share; a 47% slide versus 2014 EPS of $1.76. 

2016 has been hit and miss. The company turned in Q1 EPS of 31 cents only to give it back and then some with a 33 cent per share loss for Q2. But the forecast for Q3 and Q4 should reverse that trend, with EPS estimates of 49 cents and 75 cents. That result would be a 47% pop over 2015’s full year results. 

On the revenue side, analysts expect a 5% decline, with 2016 sales topping $2.3 billion versus 2015’s $2.42 billion. But again, patient investors may be rewarded. Revenues are expected to jump 22% in 2017 following the close of the company’s pending acquisition of Wincor Nixdorf (OTC: WNDXY). 

However, as the world moves rapidly towards being cashless, is there room for a business whose claim to fame is the cash machine?  With the moves the company and the banking industry are making, yes.

Like larger tech hardware companies such as IBM (NYSE: IBM) and Xerox (NYSE: XRX), Diebold has made the important pivot toward transforming itself into a service/software company. The company has made significant progress with its cardless “mobile cash access” solution. This platform allows consumers to initiate and complete an ATM transaction using their mobile device rather than a traditional ATM card. This also allows Diebold’s customers, the banks, to offer their own branded virtual/mobile wallet product. Additionally, the company has developed a card reader that prevents “skimming,” the most common type of ATM crime.

While cash is slowly becoming a thing of the past, most banks, in a seemingly never ending quest to streamline operations and reduce costs, are turning to automation to migrate basic transactions. Meanwhile, the service and maintenance needs of the machines will supply Diebold a steady stream of evergreen income.

Risks To Consider: ATMs and branch banking may very well be a classic “buggy whip” business. Diebold’s international business, especially in emerging markets such as China and Brazil, is off. This is partially due to actual economic softness in those markets. However, as I pointed out in an earlier piece, emerging market consumers are bypassing cash altogether and opting for digital payments and banking services via mobile device. Much like the telecommunications revolution, emerging market consumers went straight to cell phones due to the lack of hardline infrastructure. Diebold’s emerging market story may not play out. Luckily, developed markets and the company’s long range shift to more software/service facing businesses should make up the difference.

Action To Take: Shares of Diebold look primed for a bounce both technically and fundamentally. Currently, shares trade at around $28 with a forward P/E of 18.6 and a dividend yield of 4.05%. With the catalyst of improved earnings and revenues, a 12-month to 18-month price target of $35 makes sense. The result would be a total return approaching 30%.

Editor’s Note: In 2008, investors suffered through the worst market freefall since the Great Depression. But some investors banked gains as high as 413% in “hidden growth.” The next market freefall is coming on November 8th. Let me show you where the hidden growth is this time for your portfolio…