Today we're going to take a closer look at Large-Cap Consumer Discretionary company Fiserv, whose shares are currently trading at $137.09. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
A Lower P/B Ratio Than Its Sector Average but Trades Above Its Graham Number:
Fiserv, Inc., together with its subsidiaries, provides payment and financial services technology worldwide. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.96 and an average price to book (P/B) ratio of 4.24. In contrast, Fiserv has a trailing 12 month P/E ratio of 28.7 and a P/B ratio of 2.79.
Fiserv's PEG ratio is 1.26, which shows that the stock is probably overvalued in terms of its estimated growth. For reference, a PEG ratio near or below 1 is a potential signal that a company is undervalued.
The Company May Be Profitable, but Its Balance Sheet Is Highly Leveraged:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $5,823 | $10,187 | $14,852 | $16,226 | $17,737 | $18,807 |
| Revenue Growth | n/a | 74.94% | 45.79% | 9.25% | 9.31% | 6.03% |
| Operating Margins | 30% | 16% | 12% | 14% | 21% | 25% |
| Net Margins | 20% | 9% | 6% | 8% | 14% | 16% |
| Net Income (MM) | $1,187 | $893 | $958 | $1,334 | $2,530 | $2,980 |
| Net Interest Expense (MM) | $193 | -$473 | -$709 | -$693 | -$733 | -$891 |
| Depreciation & Amort. (MM) | $92 | $247 | $523 | $498 | $555 | $2,374 |
| Earnings Per Share | $2.87 | $1.71 | $1.4 | $1.99 | $3.9 | $4.88 |
| EPS Growth | n/a | -40.42% | -18.13% | 42.14% | 95.98% | 25.13% |
| Diluted Shares (MM) | 414 | 523 | 683 | 672 | 648 | 610 |
| Free Cash Flow (MM) | $1,192 | $2,074 | $3,247 | $2,874 | $3,139 | $3,835 |
| Capital Expenditures (MM) | $360 | $721 | $900 | $1,160 | $1,479 | $1,365 |
| Current Ratio | 1.11 | 1.08 | 1.04 | 1.03 | 1.04 | 1.07 |
| Total Debt (MM) | $5,959 | $21,899 | $20,684 | $21,237 | $21,418 | $23,306 |
| Net Debt / EBITDA | 3.0 | 11.32 | 8.33 | 7.32 | 4.78 | 2.85 |
Fiserv has growing revenues and increasing reinvestment in the business and decent operating margins with a stable trend. Additionally, the company's financial statements display positive EPS growth and positive cash flows. However, the firm has a highly leveraged balance sheet. Finally, we note that Fiserv has just enough current assets to cover current liabilities.
