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Global Payments Profits Expected to Climb 25% in 2018

Stock (Symbol)

Global Payments (GPN)

Stock Price

$104

Sector
Financial
Data is as of
January 11, 2018
Expected to Report
Feb 8
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 has been growing between 20% and 25% for a while now. The stock has been — and continues to be — a winner. 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. Up until 2012, Global Payments was a primarily a software company that provided merchants access to credit card companies. Then from 2013 to today the company transformed into a well-rounded force in the credit card business, thus became deserving of 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, Spain and Hong Kong. Profits are growing around 25% and the P/E is just 22. I feel this is one of the best deals for a growth stock. Visa, Mastercard and PayPal have P/Es of 28, 28 and 33, and its growing faster than the first two. Global Payments just acquired ACTIVE Networks, which gets clubs and organizations on the internet and selling subscriptions and or tickets to events including IRONMAN and Spartan. ACTIVE will keep sales growth good for the next 4 qtrs. GPN expects a tax rate of 27% in 2017, what will it be in 2018? 20%? I think this is a very good growth stock.
One Year Chart
Last qtr GPN delivered 34% profit growth which beat estimates of 26%. In 2016 the company got 75% of sales from North America, 18% from Europe, and 7% from Asia. Last qtr GPN had North America’s sales growth of 11%, Europe growth of 17% (13% on a constant currency basis) and 15% growth in Asia Pacific. 2018 profit estimates have increased from $4.57 to $4.68 and $4.71 the last three qtrs and with qtrly profit Estimates of 19%, 22%, and 21%. and 13% I think 20% to 25% profit growth can continue. The P/E is down from 24 to 22 since last qtr as I now go from 2017 to  2018 profit estimates.
Fair Value
This 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 $122 this year and $141 next year. And estimates have ticked higher the last few qtrs.
Bottom Line
Global Payments is a faster growing company than Visa and MasterCard but trades at a lower valuations. 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. I think it will continue on this trend you see here. GPN ranks 18th in the 39 stock Growth Portfolio Power Rankings. I’ll likely  add it to the Aggressive Growth Portfolio if the P/E gets below 20.
Power Rankings
Growth Stock Portfolio

18 of 39

Aggressive Growth Portfolio

N/A

Conservative Stock Portfolio

N/A

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