BlogCast #7: Looking for Opportunities: Let's Take a Look at GPN, IFF, and HSIC

2Jun23 $GPN $IFF $HSIC

John Schwinghamer

Jun 2, 2023

Global Payments Inc (GPN) operates within the payment processing sector, positioned to benefit from the societal shift towards cashless transactions.
International Flavors & Fragrances Inc (IFF) provides ingredients that food producers heavily rely on.
Henry Schein, Inc. (HSIC) is a significant player in the dental supplies business with an extensive distribution network.

Audio

Here’s a synthesized audio playback of the Purple Chips call between John and his associate Raymond. You can adjust the playback speed.

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Transcript

Raymond: Today, we're focusing on three promising stocks: Global Payments (GPN), International Flavors & Fragrances (IFF), and Henry Schein (HSIC). Both GPN and HSIC are featured in the Purple Chips Next 80, and IFF is an intriguing stock of interest. Let's kick off with Global Payments.

John Schwinghamer: Okay. As we witness a societal shift towards cashless transactions, businesses operating within the payment processing sector, such as Global Payments and Visa, are positioned to benefit greatly.

Raymond: Absolutely, John. To illustrate, I've only needed to visit a bank in person once in the past three years.

John Schwinghamer: That's a perfect reflection of the ongoing trend. Delving deeper into Global Payments, this company has consistently generated positive earnings over the past 20 years with only a few downturns. However, its current valuation, at a price of around $99, is significantly lower than typically expected for a company of this caliber.

Analysts estimate Global Payments will earn $10.34 per share in 2023. On a quarterly breakdown, the next quarter is projected to earn $2.59 per share, followed by $2.70 and $2.68 in subsequent quarters, leading to an annual total of $10.34. These figures represent an increase from last year's $2.36, $2.48, $2.42, and $9.32 respectively.

Given its current undervaluation, Global Payments presents an excellent investment opportunity for long-term investors. If earnings maintain their trend, this stock could potentially reach between $130-$140 within the next 18 to 24 months.

Raymond: John, that’s music to my ears. Having invested in GPN back in 2021, I'm ready to see the tide turn. Now, could we delve into International Flavors & Fragrances (IFF) and Henry Schein (HSIC)?

John Schwinghamer: Of course. Both IFF and HSIC operate in industries with high entry barriers, thus providing them with substantial competitive advantages. Henry Schein, a major player in the dental supplies business, stands out with its extensive distribution network. Its competitors include major companies like Dentsply Sirona (XRAY) and Patterson Companies (PDCO).

Henry Schein's robust business model and expected growth trajectory, with its current trading price around $74, suggest it could potentially reach between $95-$100 in a few years. For the coming quarters, Henry Schein is projected to post an EPS of $1.27, $1.34, and $1.45 respectively, leading to an annual total of $5.27. These figures represent an increase from the previous year's $1.16, $1.09, $1.21, and $4.81 respectively.

Moving onto International Flavors & Fragrances, the company's enduring business model is a notable strength. Food producers, big consumers of flavorings, are reluctant to alter their recipes, ensuring a steady demand for IFF's products. Despite the recent dip in earnings due to the pandemic and rising costs, I'm optimistic that IFF is poised for a recovery. Its current situation is reminiscent of General Mills; the company had experienced a downturn but bounced back to perform admirably.

Boasting a solid dividend yield of 4.2% and an attractive valuation, IFF could potentially climb to $110-$120 within 12 to 18 months, up from its current price of $77. The projected EPS for IFF in the next quarter is $1.15, down from $1.54 a year ago. However, the situation improves in subsequent quarters, with EPS of $1.42 and $1.22 expected, compared to $1.36 and $0.97 a year ago. The annual total should reach $4.66, a slight decrease from $5.55 last year.

Wrapping up, I believe these three stocks – Global Payments, Henry Schein, and International Flavors & Fragrances – present compelling opportunities in the current market.

Raymond: Thanks John. Till next time.