It’s an interesting coincidence to me that two of the largest players in U.S. merchant acquiring, Fidelity National Information (NYSE:FIS) and Global Payments (NYSE:GPN), seem pretty close today in terms of valuation relative to my estimated fair values. While I talked about the prospects for FIS about two weeks ago, today I focus on Global Payments.
In addition to ongoing synergies from the TSYS deal, Global Payments has good leverage to the ongoing growth of e-commerce, particularly in the smaller-business vertical, as well as opportunities to leverage its growing suite of proprietary cloud-based software offerings to drive share growth and share-of-wallet. Moreover, with more and more banks trying to drive card revenue, the Issuer Solutions business is looking at a good addressable market opportunity as well.
Global Payments is not all that cheap on a discounted cash flow basis, and that has been true for most merchant acquirers for most of the last decade. I wasn’t overly excited about the valuation when I last wrote about the stock, and while the shares are up more than a third since then, they’ve basically tracked the S&P 500 over that time. Still, I do see the potential of a mid-to-high single-digit long-term total return there, and a margin/return-based EV/EBITDA model suggests near-term potential in the double-digits.
Read the full article at Seeking Alpha:
E-Commerce, Software, And A General Spending Rebound Can Drive Global Payments
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