Stock (Symbol)

Global Payments (GPN)

Stock Price

$70

Sector

Financial

Data is as of

November 12, 2015

Expected to Report

Jan 6 – Jan 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 provides the technology for merchants to take your payments. As the company illustrates in the picture above, a $100 credit card transaction starts things rolling. Then 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. 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. Although this company has grown steadily this decade, the stock has shot up in price recently, and as the ten-year chart shows is extended. The stock’s P/E of 24 is well above the 13 to 16 P/E it had from 2009 to 2014. New technology, like waving your phone to make a payment, will keep GPN growing. Still, I would wait for the stock to come down before starting a position.

One Year Chart

Great one year chart, if you owned the stock a year ago. Looking at qtrly profits, growth has been good, but not the type of growth to spur almost a double in the stock. Looking ahead, profit growth is set to average 20% the next 3 qtrs, and GPN usually beats by a little. Note the Estimated Long Term Growth Rate is just 12%, which isn’t great.

Fair Value

When I see this table I wish I would have gotten in when the P/E was 13. But at the time profits weren’t growing fast enough for me. Growth only recently accelerated to >20%, last qtr. But by then the stock was high. I feel GPN is selling around its Fair Value. and profit estimates will have to rise for the stock to continue higher.

Bottom Line

The Annual Profits put out during the last decade look good — up each year. But when I look along the bottom to the yearly growth rate I’m just not that impressed. With the long base the stock made, it’s now obvious GPN was flying below the radar.

Global Payments is a hit right now, but the parabolic move the stock made this year makes me cautious. Additionally, the valuation is at a five-year high. I’ll keep GPN on my radar, and look to buy in if it drops in price.