Stock (Symbol)

Global Payments (GPN)

Stock Price

$96

Sector

Financial

Data is as of

September 21, 2017

Expected to Report

Nov 3

Company Description

GPN 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

Global 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. 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, lower-cost provider of merchant services for small businesses, had a large sales staff, and this acquisition took the number of company salesman from 100 to 1500. GPN is growing rapidly. It expanded its offerings into Canada, the UK and Puerto Rico and will soon bring them to Spain and Hong Kong. Profits are growing around 25% and with a P/E of 24 the stock is undervalued. My Fair Value for 2018 is $122 a share, 26% higher than the recent quote. Global Payments is a great growth stock that’s under the radar of average investors.

One Year Chart

Last qtr GPN delivered 29% profit growth which beat estimates of 26%. Sales increased 18% with North America up 20%, Europe up 13%, and Asia Pacific up 15%. 2017 profit estimates ticked up from $3.91 to $3.95 with 2018’s rising from $4.57 to $4.69. Qtrly profit Estimates are 28%, 19%, 20%, and 20%. The stock has a nice Est. LTG of 19% per year and a reasonable P/E of 24.

Fair Value

GON used to have a smaller P/E when it was just did the technology for transactions. Now with Heartland it can get a bigger piece of the pie and expand at a faster rate, thus the P/E ratio should be larger. My Fair Value is a P/E of 26, which is $103 this year and $122 next year. Remember GPN just upped estimates so these figures may be conservative.

Bottom Line

Global Payments is a faster growing company than Visa and MasterCard but trades at a lower valuation. Plus, this company isn’t as big as those two, so there’s room for expansion — especially within electronic payments. Global Payments’ e-commerce business has risen from $250 million a year to $400 million in two years, and the overall market is $30 billion. GPN is a solid growth story that’s still under the radar of most investors. The stock ranks 19th of 34 stocks in the Growth Portfolio Power Rankings.