Modern day transactions have increasingly shifted towards digital payments, with digital payments firms paving the way for more convenient transactions.

However, even though digital transactions are growing at a rapid pace, this doesn’t mean legal tenders are on their way out, with 83% of Americans using cash last year to pay for their transactions.

With cash here to stay, governments and businesses would need access to reliable technology to prevent fraud and counterfeiting schemes.

Crane NXT, Co. (CXT) is a company that provides these solutions and has expanded its influence in the authentication landscape.

Yet despite growing demand for its critical offerings, the market is overlooking this company, as it trades at a below-average Uniform P/E of 13x.

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Modern day transactions have increasingly shifted towards digital payments as consumers now have the ability to pay for purchases with a single tap of a card or by scanning a QR code.

With millions of transactions going on each day, the total transaction value of digital payments in the U.S. is expected to reach over $3 trillion this year.

Despite the increasing reliance on digital payments, this doesn’t mean that physical payments is on its way out. Last year, 83% of American consumers used cash to pay for their transactions.

And with cash here to stay, governments and businesses will need access to technology that would help them prevent fraudulent behavior surrounding physical payments.

This is where Crane NXT, Co. (CXT) comes in.

The company was established in 2023 after the spinoff of Crane Holdings Company into two publicly traded companies, namely Crane NXT and Crane Company.

Crane NXT is a technology firm that specializes in providing solutions for security, detection, and authentication. It currently operates three core segments: 1.) Crane Payment Innovations, 2.) Crane Authentication, and 3.) Crane Currency.

Crane Payment innovations provides customers with authentication solutions, cash management systems, mobile applications, as well as bill and coin validation and cash recycling and dispensing systems.

Meanwhile, Crane Currency is the business unit responsible for supplying and designing banknotes for central banks across the globe. This segment is known for leveraging Crane NXT’s patented micro-optic technology that’s used in validating banknotes and preventing counterfeiting and fraud.

Lastly, Crane Authentication—the company’s rapidly-expanding segment—is a business unit that offers security and authentication services to both governments and businesses. Its offerings range from fraud detection, identity and revenue protection to brand protection and intelligence.

With central banks frequently modernizing banknotes and countries raising security standards amid rapidly evolving identity theft and fraud schemes, security and authentication are becoming major priorities for businesses and governments worldwide.

Crane NXT has benefited from this tailwind, generating a Uniform return on assets (“ROA”) of 30% last year while achieving Uniform asset growth of 14%.

Recently, the company’s expansion efforts have positioned it to widen its global footprint and presence in the authentication space.

In May, Crane NXT completed its acquisition of De La Rue Authentication Solutions, adding security technologies for government-issued identification documents and credentials to its portfolio.

This was followed by the acquisition of Antares Vision in September, a firm specializing in the design and maintenance of inspection and detection systems as well as software solutions designed to prevent counterfeiting.

Yet despite rising demand for its offerings, Crane NXT’s stock trades at a Uniform price-to-earnings (“P/E”) of 13.1x, well below the corporate averages of 25x.

This signals that the market is undervaluing the company’s essential technology and growing global relevance.

We can see what the market thinks through our Embedded Expectations Analysis (“EEA”) framework.

The EEA starts by looking at a company’s current stock price. From there, we can calculate what the market expects from the company’s future cash flows. We then compare that with our own cash-flow projections.

In short, it tells us how well a company has to perform in the future to be worth what the market is paying for it today.

At current prices, investors are expecting Crane NXT’s Uniform ROA to drop to 16% by 2029, a significant drop from the 30% Uniform ROA it delivered last year.

These expectations indicate that the market is currently fixated on digital payments and believe that it will continue to grow further and could even dramatically decrease the reliance on banknotes.

And while that may be true to some extent, Crane NXT, through its offerings and critical technology—which only a handful of companies across the globe can provide—has quietly positioned itself to become a critical player in the security and authentication space.

Investors who understand just how overlooked this company is will be positioned for significant upside as long as the company sustains its level of returns and overperforms expectations.

Best regards,

Joel Litman & Rob Spivey
Chief Investment Officer &
Director of Research
at Valens Research