Global Payments Inc. GPN is poised for long-term growth on the back of solid revenue growth, accretive acquisitions that complement organic growth, technological investments and solid capital position.
Shares of this Zacks Rank #2 (Buy) company have rallied 24% year to date compared with the S&P 500 Index’s growth of 12.2%. The stock has a Growth Score of B. Growth Score helps to find growth stocks. Back-tested results show that stocks with a Growth Score of A or B coupled with a Zacks Rank #1 (Strong Buy) and 2 offer the best investment opportunity.
Here’s what makes the stock attractive:
Consistent Top-line Growth: Global Payments sustained growth for long. Its revenues witnessed a CAGR of 10.5% between 2008 and 2018. Given that, the company consistently pursues acquisitions, enters alliances and makes joint ventures. These factors are likely to fuel business growth and add to the top line. Moreover, there is ever-increasing demand for electronic payment transactions, which provide the company with abundant scope for growth. For 2019, it expects adjusted net revenue plus network fees to be $4.43 billion to $4.49 billion, reflecting growth of 12-13% year over year.
Strong Guidance: For 2019, adjusted EPS is projected to be $5.90-$6.10, reflecting growth of 14-18% year over year. Annual adjusted operating margin for 2019 is expected to expand by up to 70 basis points.
Accretive Acquisitions: Global Payments has been emphasizing acquisitions for expedited growth. A number of acquisitions made in recent years added to its scale and size. One of the most notable acquisitions is the purchase of Heartland Payments Systems (completed in 2016). The merger significantly expanded Global Payments’ small and medium-sized enterprise distribution, merchant base, and vertical reach in the United States.
Other acquisitions, including assets of FIS Gaming Business, Pay and Shop Limited, Ezidebit, PayPros, eWay, and the communities and sports divisions of ACTIVE Network, added to the company’s overall business. Recently, it acquired AdvancedMD, a medical software firm, which will accelerate its business mix toward technology enablement. We believe that the company’s active acquisition strategy will help it achieve long-term growth.
Investment in Technology: Ongoing investment in technology has led to the shift of its business mix toward technology enablement, which is expected to represent 60% of the company’s revenues (up from 30% in 2015) and drive a significant portion of total growth by the end of 2020, with a balanced portfolio across owned SaaS, partnered software, and ecomm and omni-channel assets.
Increasing Cash Flows: The company’s operating cash flows have been increasing for the past many years. In 2018, the same increased 116%. The company’s operating cash flow per share, a measure which signifies financial strength, is 7.3, which is higher than the industry average of 5.1. Strong financial flexibility will help the company to invest in businesses, which will likely drive long-term growth.
Other Key Picks
Some other top-ranked stocks are Federated National Holding Company FNHC, Synchrony Financial, SYF and Virtu Financial, Inc. VIRT. Federated and Synchrony Financial currently carry a Zacks Rank #2. Virtu Financial sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Federated and Synchrony Financial beat estimates in each of the trailing four quarters, the averages being 44.9% and 13.8%, respectively. Virtu Financial beat estimates in three of the trailing four quarters, the average positive surprise being 0.63%.
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