Global Payments: Unveiling the Hidden Gem!

From Peaks to Potential: The Global Payments Story. 21Jul23 Update #509, Audio+Transcript+Charts

John Schwinghamer and associate Raymond discuss their interest in Global Payments $GPN. They take a deep look at past performance and explain why they find this stock could be a promising investment opportunity.

Below you will find Audio + Transcript + Charts

Audio

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

Transcript

Raymond: Hello, John. A warm welcome to our latest blogcast. Today's discussion focuses on Global Payments, an intriguing opportunity that just might check all the boxes.

John: Indeed, Global Payments is a stock worth exploring. Though its recent performance has been less than stellar - the stock has dwindled from a peak of around $220 in December 2020 to about $110 now - it doesn't paint the whole picture. We have seen the stock's lowest point in recent years hit around $92.27, and a 52-week high of $136.88. But these numbers can be misleading if viewed in isolation.

If we look at the company's long-term performance, it's been consistently growing its earnings for two decades. Except for a handful of negative quarters, Global Payments has presented a stable and steady growth curve. This is an aspect that, as an investor, I find quite thrilling.

Raymond: It's worth mentioning that I have done my homework too. In terms of earnings growth, Global Payments seems to be one of the shining stars in the whole Purple Chips universe.

John: I couldn't agree more, Raymond. Another facet that catches my eye is the P/E multiple of Global Payments, which is presently about 11 times. By most standards, that's considered low. Additionally, the company pays a dividend of $1 a share, equating to just under 1% yield.

Over the last 20 years, the average P/E for the company has been over 20 times. Thus, when viewed historically, the current valuation appears considerably undervalued. The exciting part here is that Global Payments is a fintech company playing in the payments arena. Their role in managing and facilitating online payments and their partnerships with credit card companies and financial institutions paints a promising future.

Raymond: So Square would be a company in a similar domain?

John: Yes, absolutely. However, Square has been struggling lately, and in terms of P/E, it's trading at a higher multiple.

The low multiple, its business domain, the dividend it pays, and its undervalued position make Global Payments an intriguing proposition. I believe this stock is seriously undervalued. I wouldn't be surprised if the stock climbs to around $150 just by witnessing an increase in institutional demand, without any significant alteration in the fundamentals.

In the spirit of full disclosure, I have invested in this company. I own this stock and also hold long-term call options on it. As of today (Friday), the stock is trading at $110.45. But the forward earnings picture is also worth examining to evaluate potential risks or roadblocks. As per analyst consensus estimates, Global Payments should earn about $10.34 in 2023, $11.80 in 2024, and roughly $13.50 in 2025. These figures represent an impressive 14% earnings growth annually. Considering these estimates and the fact that the stock is trading at just under 11 times earnings, it's safe to say the stock is undervalued.

Raymond: Do we have a pre-pandemic high figure for this stock?

John: Before the pandemic hit, the stock was trading at a robust $220. The stock price plummeted during the pandemic, but interestingly, the earnings didn't follow the same trajectory - they continued to rise. This divergence indicates the stock is getting cheaper, making it an enticing opportunity for investors seeking low-risk propositions.

Raymond: From what you've shared, it does seem that Global Payments has managed to tick all the boxes.

John: Exactly, it's indeed a solid pick. Opportunities like these, offering low risk with potential good performance, are the ones we continually strive to uncover!

Raymond: John, this has been really insightful. Thank you for sharing your analysis. Looking forward to our next conversation.

Charts

(chart dated 07-12-23)