Fiserv (FI) Stock is One of the Best Values in the Stock Market Today

Stock (Symbol)

Fiserv (FI)

Stock Price

$168

Sector

Data is as of

Expected to Report

Company Description

Fiserv is a global provider of payments and financial services technology solutions.

The Company provides account processing and digital banking solutions, card issuer processing and network services, payments, e-commerce, merchant acquiring and processing, and the Clover cloud-based point-of-sale solution.

The Company’s segments include Merchant Acceptance (Acceptance), Financial Technology (Fintech) and Payments and Network (Payments).

The Acceptance segment provides a range of commerce-enabling solutions and serves merchants of all sizes around the world. Acceptance solutions enable businesses to securely accept consumers’ electronic payment transactions online or in-person.

The Fintech segment provides financial institutions around the world with the technology solutions they need to run their operations.

The Payments segment provides financial institutions and corporate clients around the world with the products and services required to process digital payment transactions. Source: Refinitiv

Sharek’s Take

Fiserv (FI) is one of the best stocks in the stock market right now. The company isn’t a rapid grower, but its consistent mid-teens profit growth is becoming more admired by investors as the stock’s risen from around $120 to around $170 during the past year. Last quarter FI delivered 18% profit growth on just 7% revenue growth.

• Clover is a full point-of-sale system for merchants to ring up sales, take payments on Clover point-of-sale devices, and keep track of numbers. Clover also provides omnichannel shopping/checkout solutions (such as order ahead to pick up) to 10 of the top 15 quick service restaurants (QSR) including McDonald’s, Chick-fil-A, Taco Bell and Dunkin Donuts.
• Zelle is a digital person-to-person payments platform that allows users to send money. It’s similar to PayPal, Venmo or Cash App. Fiserv doesn’t actually own Zelle, but it does run payment processing for it and collects interchange fees for providing this service. Zelle looks like the new leader in the send money space. Zelle is owned by Early Warning Systems, which is owned by JP Morgan Chase, Bank of America, Wells Fargo, and other big banks.

Fiserv software controls ATM transactions, money transfers, and mobile banking to more than 13,000 banks and credit unions around the world. The company manages around 6 million merchant locations, 10,000 financial institutions, 140 million deposit accounts, 80 million online U.S. banking users, via nearly 1,000 products and services. In July 2019 Fiserv merged with First Data (FDC). First Data specialized in point-of-sale transactions, with a substantial share of the gas and grocery market. Prior to the merger, First Data processed 4 out of 10 transactions at the point-of-sale in the US and had more than 1 billion cards on file.

Here are some quick stats and information on Fiserv’s business segments as of last qtr:

• Merchant Acceptance Segment:
  • Revenue +9%, accounted for 50% of company sales.
    • Small Business revenue increased 14%.
    • Enterprise revenue grew 9%.
    • Processing revenue declined 8%. A few large processing clients experienced declines in their volumes and revenue.
  • Clover revenue grew 28%, with an annualized payment volume growth of 17%. Primarily driven by new product roll outs and hardware launches tailored for casual dining and smaller merchants, successful sales of restaurant order kiosks, and ongoing international expansion in Brazil, Mexico, and Australia.
• Financial Solutions Segment:
  • Revenue +6%, accounted for 50% of total sales.
    • Digital payments revenue grew 8%.
    • Issuing revenue grew 4%. Driven by account growth internationally and new loan accounts in North America.
    • Banking revenue grew 4%. There were some signs of pressure on net interest income given high interest rates and potentially tighter lending.
  • Zelle transactions grew 43%. Management continues to see strong demand from clients for FedNow, an instant payment app of the Federal Reserve, and Real Time Payment (RTP) integration.

Fiserv is a high quality stock that has delivered double-digit profit growth every year since 1986. Remarkable. Since the company went public in 1986, the stock’s gone from $0.28 to $168 since then. Management does not pay a dividend, but instead has purchased billions in stock since the company’s share buyback program began in 2005. In 2023, management repurchased $4.7 billion in stock, and reduced its shares outstanding by 5% for the year. FI is part of the Conservative Growth Portfolio, Growth Portfolio.and I added it to the Aggressive Growth Portfolio last qtr.

One Year Chart

And with a P/E of only 19, I still think that the stock has room to run higher. I can imagine FI getting a  P/E of 25 within a year.

The Est. LTG of 15% is very good for a safe stock such as this. This figure was 16% last qtr.

Profit growth has been 15% to 20% the past four quarters. That’s solid!

Earnings Table

Last qtr, Fiserv reported 18% profit growth and beat expectations of 16% growth. Revenue increased 7% aligned with analyst’s expectation of 7%.Organic revenue growth was a solid 18%.

Clover revenue grew 28%, with VAS penetration of 20%. Small Business grew 13%, Enterprise grew 9% and Processing declined 8%. In merchant acquiring, Fiserv already has nearly 900 financial institutions who offer merchant processing services to their small business clients. Fiserv posted 4% volume growth with small business, slightly ahead of the sales volume growth for the Fiserv Small Business Index, which rose 3% last quarter. In financial solutions, Fiserv delivered faster organic growth in banking business while core banking and credit union clients continued to drive strong growth in digital payment business. Digital payment grew 8%.

Annual Profit Estimates are up for the 6th consecutive qtr. For 2024, management affirms organic revenue growth of 15% to 17%. Management is still bullish on Clover growth continuing to be strong at around 30% in 2024.

Qtrly Profit Estimates are for 15%, 13%, 14%, and 16% growth the next 4 qtrs. Mid-teens profit growth is expected to continue.Analysts think FISV revenue will grow 6% next qtr.

Fair Value

FISV has a P/E of only 19 this quarter. Wow, this stock is a real deal!

My Fair Value P/E is 25, giving the stock upside of 23% for this year and 51% for next year.

Notice the consistent profit growth each year during the past decade. This company is like a machine.

Bottom Line

Fiserv’s (FISV) ten-year chart shows a stock that used to grow steadily, then had a multi-year run of going sideways.

FI stock is one of the best values in the stock market today. Mid-teens profit growth with a P/E in the high-teens. It’s such a good company. Investors are finally waking up to that.

FI ranks 2nd in the Conservative Portfolio Power Rankings.

The stock moves from 7th to 8th in the Growth Portfolio Power Rankings.

The stock ranks 12th Aggressive Growth Portfolio Power Rankings.

Power Rankings

8 of 32

Aggressive Growth Portfolio

12 of 15

Conservative Stock Portfolio

2 of 23