It's been a great evening session for Global Payments investors, who saw their shares rise 2.3% to a price of $94.37 per share. At these higher prices, is the company still fairly valued? If you are thinking about investing, make sure to check the company's fundamentals before making a decision.
The Market May Be Undervaluing Global Payments's Assets and Equity:
Global Payments Inc. provides payment technology and software solutions for card, check, and digital-based payments in the Americas, Europe, and the Asia-Pacific. The company belongs to the Consumer Discretionary sector, which has an average price to earnings (P/E) ratio of 22.06 and an average price to book (P/B) ratio of 3.18. In contrast, Global Payments has a trailing 12 month P/E ratio of 18.8 and a P/B ratio of 1.08.
When we divideGlobal Payments's P/E ratio by its expected five-year EPS growth rate, we obtain a PEG ratio of 0.58, which indicates that the market is undervaluing the company's projected growth (a PEG ratio of 1 indicates a fairly valued company). Your analysis of the stock shouldn't end here. Rather, a good PEG ratio should alert you that it may be worthwhile to take a closer look at the stock.
The Firm Has a Highly Leveraged Balance Sheet:
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (M) | $3,366 | $4,912 | $7,424 | $8,524 | $8,976 | $9,654 |
| Operating Margins | 22% | 16% | 12% | 16% | 7% | 18% |
| Net Margins | 13% | 9% | 8% | 11% | 1% | 10% |
| Net Income (M) | $452 | $431 | $585 | $965 | $111 | $986 |
| Net Interest Expense (M) | $21 | $31 | $44 | $19 | $34 | $114 |
| Depreciation & Amort. (M) | $145 | $211 | $358 | $396 | $399 | $458 |
| Diluted Shares (M) | 319 | 398 | 301 | 294 | 276 | 262 |
| Earnings Per Share | $1.42 | $1.08 | $1.95 | $3.29 | $0.4 | $3.77 |
| EPS Growth | n/a | -23.94% | 80.56% | 68.72% | -87.84% | 842.5% |
| Avg. Price | $110.71 | $147.94 | $173.45 | $174.64 | $130.7 | $94.58 |
| P/E Ratio | 77.96 | 107.99 | 88.95 | 53.41 | 326.75 | 25.22 |
| Free Cash Flow (M) | $893 | $1,083 | $1,878 | $2,288 | $1,628 | $1,591 |
| CAPEX (M) | $213 | $308 | $436 | $493 | $616 | $658 |
| EV / EBITDA | 44.53 | 53.97 | 47.4 | 34.8 | 46.47 | 17.99 |
| Total Debt (M) | $5,245 | $9,161 | $9,294 | $11,493 | $13,459 | $16,313 |
| Net Debt / EBITDA | 4.57 | 7.46 | 5.87 | 5.42 | 11.02 | 6.54 |
| Current Ratio | 1.03 | 1.22 | 1.01 | 1.06 | 0.92 | 0.99 |
Global Payments has rapidly growing revenues and increasing reinvestment in the business, generally positive cash flows, and a strong EPS growth trend. However, the firm suffers from not enough current assets to cover current liabilities because its current ratio is 0.99 and a highly leveraged balance sheet. Finally, we note that Global Payments has decent operating margins with a stable trend.
