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Friday, October 05, 2007

Through The Fly's Eyes: Global Payments

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.



Global Payments: Paying The Electronic Way

If you use a credit card, the chances are pretty fair that you have done some business with an Atlanta outfit that facilitates electronic transactions around the world.

Global Payments (GPN) is a high-volume payments processor of electronic transactions and related money transfers. It performs point-of-sale credit card, debit card and check authorization functions for merchants and financial institutions and offers corporate and government clients benefit transfer processing and electronic tax payment services. The firm also facilitates money transfers from the US and Europe, primarily targeting immigrants who send funds to their home countries. MasterCard (MA) is a client. Western Union (WU) is a competitor.

The firm had good news for investors last week, when it announced fiscal Q1 EPS of 54 cents and revenues of $311 million. Wall Street has been expecting 50 cents and $294.6 million. The company attributed the successful quarter to a solid increase in merchant service revenues, continued organic expansion and favorable results from an Asia-Pacific joint venture with HSBC. Management also guided FY08 EPS to $1.87-1.96 ($1.91 consensus) and FY08 revenues to $1.20-$1.25 billion ($1.19B consensus). Barrington Research subsequently reiterated its "outperform" on the shares.

The news popped GPN into a "pennant" consolidation pattern, from which it is expected to rise. Altogether, brokers recommend the issue with twelve "strong buys," four "buys" and seven "holds." The GPN Price to Book ratio (3.83), Price to Free Cash Flow ratio (22.01), Sales Growth rate (50.75%), Operating Margin (19.85%), Net Profit Margin (13.04%), Return on Assets (12.97%) and Return on Investment (15.02%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $30 and $49.13. A stop-loss of $38.25 looks good here.

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