The Payment Processor Investors Don’t Know

Stock (Symbol)

Global Payments (GPN)

Stock Price


Data is as of
July 1, 2017
Expected to Report
Aug 3
Company Description
globalpayGPN provides payment and digital commerce solutions, including payment solutions for credit cards, debit cards, electronic payments and check-related services. 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 most investors are unaware of. Global Payments enables merchants to accept credit cards, electronic payments, check and digital based payments at the point of sale, including mobile payments, gift cards and loyalty programs. In an example purchase, the customer charges $100 at a store, the merchant deals with Global Payments to get the $100 back (minus $2.00 GPN retains). GPN then keeps $0.50 as its net revenue, and sends $1.50 to the member/settlement bank. GPN was spun off of National Data Corp in 2001 and competes with Bank of America, Chase, Wells Fargo, and First Data. In 2016 the company got 75% of sales from North America, 18% from Europe, and 7% from Asia (note: GPN recently changed its fiscal year-end from May 31 to December 31). Up until 2012, Global Payments was a primarily a software company that provided merchants access to credit card companies, now the company is well rounded and deserves a higher multiple (P/E) due to a faster growth outlook. In April 2016 it acquired Heartland Payment Systems, one of the largest payment services companies in the US, which works with small and mid-sized merchants as well as education providers. Heartland is a lower-cost provider of merchant services for small businesses. Heartland also had a large sales staff, and this acquisition took the number of company salesman from 100 to 1500. GPN’s profits are expected to grow a robust 23% this year and has a P/E of 23. That’s a good value. Also, the Est. LTG of 18% long-term isn’t shabby. And the sector (FinTech) is hot as well. With profits up in each of the last ten-years, Global Payments is a core holding for the Growth Portfolio.
One Year Chart
Last qtr GPN delivered 47% sales growth with help of the Heartland acquisition. Profits grew 21% but missed estimates of 24%. But 2017 profit estimates increased from $3.84 to $3.91. Qtrly profit Estimates are 26%, 28%, 19% and 19%. The stock has a nice Est. LTG of 18% per year and a reasonable P/E of 23.
Fair Value
As I mentioned above, this is a bigger better company than it was five years ago, and deserves a higher multiple. My Fair Value goes up from 22x earnings to 25x, giving the stock a a Fair Value of $98 this year and $114 next year.
Bottom Line
Global Payments is a faster growing company than Visa and MasterCard but trades at a lower valuation. I like that profits have hit record highs in each of the last ten years, but the stock might be a little extended here. Still, with a P/E of 23 Global Payments isn’t expensive and the move to digital payment processing is a wind at this company’s back. GPN ranks 22nd of 33 stocks in the Growth Portfolio Power Rankings.
Power Rankings
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22 of 33

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