Company Overview: Global Payments Inc. (NYSE: GPN) is a leading payments technology firm that offers software and services to small and midsize businesses worldwide. Its three revenue-generating segments are Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions. It serves over 1,300 financial institutions and 3.5 million merchant locations in over 100 countries spanning North America, Europe, Asia-Pacific, and Latin America.
Key Takeaways from Q2FY21 (ended June 30, 2021)
Revenues & Gross Profit Key Highlights; Analysis by Kalkine Group
Segment Wise Revenue for Q2FY21 (ended June 30, 2021)
Revenue by Segment; Analysis by Kalkine Group
Balance Sheet & Liquidity Position
Key Metrics: In Q2FY21, GPN's operating and net margins were 17.0% and 10.6%, higher than the industry median of 13.9% and 7.6%, respectively. EBITDA margin stood at 44.0% in Q2FY21 vs. the industry median of 18.5%. As of June 30, 2021, its Debt/Equity ratio was 0.40x, compared to the industry median of 0.48x.
Profitability and Leverage Profile; Analysis by Kalkine Group
Top 10 Shareholders: The top 10 shareholders together form around 46.76% of the total shareholding, while the top 4 constitute the maximum holding. T. Rowe Price Associates, Inc. and The Vanguard Group, Inc. hold the maximum stake in the company at 14.77% and 7.98%, respectively, as also highlighted in the chart below:
Top 10 Shareholders; Analysis by Kalkine Group
Valuation Methodology: EV/Sales Multiple Based Relative Valuation (Illustrative)
Source: Analysis by Kalkine Group
*% Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.
Stock Recommendation: Over the last six months, GPN corrected ~26.51%. The stock is currently leaning towards the lower end of its 52-week range of USD 153.33 to USD 220.81. We have valued the stock using the EV/Sales multiple-based illustrative relative valuation method and arrived at a target price with an upside of low twenties (in percentage terms). We believe that the company can trade at a premium compared to its peer's average, considering the substantial profit margins, stable leverage, encouraging outlook, strategic acquisitions, and recent collaborations. We have taken peers like Fiserve, Inc. (NASDAQ: FISV), Fidelity National Information Services Inc. (NYSE: FIS), Square, Inc. (NYSE SQ), among others. Considering the robust top and bottom-line performance, strategic growth initiatives, strong profitability margins, associated risks, and current valuation, we give a "Buy" recommendation on the stock at the current price of USD 154.26, down ~3.50% as of October 04, 2021, 11:04 AM ET.
GPN Technical Chart, Data Source: REFINITIV
Note 1: The reference data in this report has been partly sourced from REFINITIV.
Note 2: Investment decision should be made depending on the investors' appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the valuation has been achieved and subject to the factors discussed above.
Technical Indicators Defined
Support: A level where-in the stock prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.
Resistance: A level where-in the stock prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.
Stop-loss: It is a level to protect further losses in case of unfavorable movement in the stock prices.
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