Global Payments is the Payment Processor You Haven’t Heard Of

Stock (Symbol)

Global Payments (GPN)

Stock Price


Data is as of
September 26, 2016
Expected to Report
Oct 5
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 the payment processor you haven’t heard of. 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 in providing 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. Global Payments gets 60% of sales from the US, 22% from Europe, 11& from Canada and 7% from Asia. The company recently acquired Heartland Payment Systems, which works with small and mid-sized merchants as well as education providers. GPN has seen its P/E ratio surge from 13 in 2013 to 22 today. I honestly think GPN is worth the higher valuation, and have a Fair Value of 24x earnings or $83 on the stock, which is 10% higher than the recent quote. I have the stock on my radar, but am going to wait on buying as the company is expected to have just 5% and 9% profit growth the next two qtrs. Three and four qtrs out profit growth is expected to climb to 23% and 29%, thus it would be nice to pick up the stock over the next 3-to-6 months.
One Year Chart
gpn_2016_q3Looking back at the past year it seems the time to buy was when the stock was between $55 and $60 but at the time (1) the stock market was in a crazy correction that looked like it could crash and (1) when GPN was $60 the P/E was 18 and that was still high by historical standards. The company met profit estimates last qtr, and only beat by a penny the prior two qtrs, thus I think the slower growth will indeed happen over the next six months.
Fair Value
gpn_2016_q3_phGPN has a May 31st fiscal year end, therefore I will be looking at the 2016 estimate until next Spring. That gives the stock 10% upside to my Fair Value. But I want to point out I’m valuing the stock at 24x earnings. That’s a steep valuation compared to the low-teens P/E the stock garnered years ago. It’s rare that Wall Street starts to give a higher valuation to a company, especially when profits aren’t growing any faster than they used to. Thus GPN might not keep this higher valuation — that the P/E could come down to below 20 — and that’s the risk I see in this stock.
Bottom Line
gpn_2016_q3_10yrGlobal Payments is now a Wall Street darling after years of being a stock that did nothing. I feel the stock is worth the high price it’s getting today, but when I look at the steep climb it’s made the past three years I’m worried it could come back down a bit. I have Global Payments on my radar for growth accounts, but with just 10% upside to my Fair Value and slow growth expected the next couple of qtrs I am waiting to buy in at a lower price.
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