Global Payments is Down But Still Not On Sale

Stock (Symbol)

Global Payments (GPN)

Stock Price


Data is as of
January 31, 2016
Expected to Report
Apr 6 – Apr 11
Company Description
globalpayments_transactionflowGPN 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
David SharekGlobal 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
GPN_2016_Q1What 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
GPN_2016_Q1_PHNote 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
GPN_2016_Q1_10yrGlobal 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. 
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