Compelling Reasons to Hold on to Fidelity (FIS) Stock Now
Fidelity National Information Services, Inc. FIS is strategically positioned for growth amid the accelerated digitization of the global economy. The company's proactive approach to acquisitions and collaborations enhances its competitive edge. The increasing global demand for digital payment solutions further amplifies FIS' growth prospects, reflecting its responsiveness to evolving market trends.
Fidelity — with a market cap of $34.9 billion — provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Based in Jacksonville, FL, FIS strategically leverages technology to address critical business challenges, fostering innovation and enhancing customer experiences.
Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
The Zacks Consensus Estimate for Fidelity’s 2023 revenues from continuing operations is pegged at $10.4 billion for 2023, signaling a 6.7% year-over-year increase. Furthermore, the consensus mark for earnings from continuing operations is pegged at $3.52 per share. FIS beat on earnings in three of the last four quarters and missed once. This is depicted in the figure below.
Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote
The company doesn’t shy away from less profitable assets. It is divesting a majority stake in the Worldpay Merchant Solutions business to private equity funds managed by GTCR, which is scheduled to be completed in the first quarter of 2024. The move is poised to generate substantial funds and allow the redirection of capital toward more lucrative operations.
FIS maintains a competitive advantage through its dedicated emphasis on technological advancements, positioning it favorably in client acquisitions and future-proofing underlying technologies. The robust performance of the Banking Solutions and Capital Market Solutions segments is noteworthy. We expect organic revenue growth from Capital Market Solutions to be at 5% in 2023.
Fidelity strategically expands its business through targeted acquisitions, exemplified by ventures like Payrix. FIS, with a focus on e-commerce, fortifies its portfolio, emphasizing entry into high-growth verticals and tapping into under-penetrated markets. Prudent partnerships further augment market presence, showcasing a strategic approach to enhancing the total addressable market.
Fidelity’s valuation seems inexpensive at the current level. Looking at its 12-month forward price-to-earnings multiple, investors may want to pay a higher premium. FIS currently has a ratio of 14.3X, lower than the industry average of 22X.
Key Concerns
There are a few factors that investors should keep an eye on.
Rising costs pose a significant challenge to profitability, with selling, general and administrative expenses exhibiting a 26% CAGR over the past five years (ending 2022). Margin erosion is anticipated due to ongoing IT infrastructure modernization efforts. Complicating the financial landscape, the company faces substantial long-term debt totaling $12.7 billion as of the third quarter, resulting in a net debt-to-capital ratio of 42.2%, notably surpassing the industry average of 16.4%. Nevertheless, we believe that a systematic and strategic plan of action bodes well for the long run.
Key Picks in Business Services
Some better-ranked stocks in the broader Business Services space are FirstCash Holdings, Inc. FCFS, Shift4 Payments, Inc. FOUR and RB Global, Inc. RBA. While FirstCash and Shift4 Payments currently sport a Zacks Rank #1 (Strong Buy) each, RB Global carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for FirstCash’s current year bottom line indicates 13.1% year-over-year growth. Headquartered in Fort Worth, TX, FCFS beat earnings estimates in all the past four quarters, with an average surprise of 7.9%.
The Zacks Consensus Estimate for Shift4 Payments’ current year earnings is pegged at $2.92 per share, which indicates 110.1% year-over-year growth. Allentown, PA-based FOUR beat earnings estimates in all the past four quarters, with an average surprise of 25%.
The Zacks Consensus Estimate for RB Global’s current year bottom line suggests 12.5% year-over-year growth. Based in Westchester, IL, RBA beat earnings estimates in each of the past four quarters, with an average surprise of 18.9%.
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Fidelity National Information Services, Inc. (FIS) : Free Stock Analysis Report
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