Stock (Symbol)

Global Payments (GPN)

Stock Price

$59

Sector

Financial

Data is as of

January 31, 2016

Expected to Report

Apr 6 – Apr 11

Company Description

GPN is a provider of payment technology services. The Company provides payment and digital commerce solutions. GPN operates in two segments: North America merchant services and International merchant services. GPN North America merchant services and International merchant services segments primarily provide payment solutions for credit cards, debit cards, electronic payments and check-related services. The Company’s North America merchant services and International merchant services segments target customers in various industries, including financial services, gaming, government, healthcare, professional services, restaurants, retail, universities, not-for-profit organizations and utilities. GPN performs a series of services, including authorization, electronic draft capture, file transfers to facilitate funds settlement and certain exception-based, back office support services, such as chargeback and retrieval resolution. Source: Thomson Financial

Sharek’s Take

Global Payments is well off its highs, but still not on sale. GPN made a run from $40 to $70 from Dec 2014 to Nov 2015, and since then has backed down to the $60 area. But even after the pullback the stock sells for 20x earnings, which is around the rate profits are growing at, thus the stock’s not on sale. Global Payments was spun off of National Data Corp in 2001 and competes with Bank of America, Chase, Wells Fargo, and First Data among others. The company provides the technology for merchants to take your payments. As the picture above illustrates, a customer charges $100, the merchant deals with Global Payments to get the $100 back (minus $2.00 GPN gets). GPN then keeps $0.50 of the two dollars as its net revenue. Although GPN is growing 20% presently, the company has an estimated long-term growth rate of 12%, and I feel here at 20x earnings the stock’s fairly valued here. The company gets 60% of sales from the US, 22% from Europe, 11& from Canada and 7% from Asia so there are F/X concerns. GPN has had a P/E in the mid-teens the past six years and there’s risk the stock could fall to that point again.

One Year Chart

What I don’t like about this chart is the stock flew higher as profit growth was averaging 20%. Seems like GPN got a little extended (exhausted). The company recently acquired credit card processor Heartland Payment Systems and this could boost profits in the coming qtrs. Honestly, it needs to! Estimates show profit growth declining from 21% the next 2 qtrs to 11% three and four qtrs out.

Fair Value

Note GPN was selling for 13x earnings a few years ago. But then again profits weren’t growing as fast at the time. I do like that profits increased each year during the last decade. My Fair Value for 2016 is $59, which is where the stock’s selling at.

Bottom Line

Global Payments just made a big run higher and is now digesting its gains. I do wish to point out the stock hasn’t been a consistent grower in the past, and there’s a change the stock could build another long base. I like this company, but there are F/X concerns and I don’t like it enough to buy in at this time.