Could This Little-Known Company Be the Next Mastercard Stock?
Global Payments Stock Is Top Dog for Fintech Investors
I have to say it: soft-serve cones are a guilty pleasure I can’t pass on. So here I am, standing next to an ice cream truck, looking for some change, only to realize that I stopped carrying cash a long time ago. Haven’t we all switched over to cards? Tapping or swiping on the go is so much easier than counting dimes or piggy-banking pennies. The truth is, with the rise of fancy mobile payment apps, carrying cash seems boring.
It is easy to guess that digital and mobile payments stocks have become promising investments for the future. Allow me to introduce you to one such lesser-known digital/mobile payments stock, Global Payments Inc (NYSE:GPN).
Wait! Do not underestimate GPN stock, for this Fortune 500 company can deliver 47% in returns! Yes, I’m seeing GPN stock hitting Mastercard stock’s valuation of $118.00 apiece, which is a solid 47% upside potential from current levels.
This company is, by the way, serving a multitude of businesses in the U.S., Canada, and 28 other countries; the name has “Global” in there for a reason. So, before we delve deeper into it, here’s some background on the financial technology (fintech) industry.
Back in the day, financial institutions (read: banks and credit card companies) traditionally took care of financial transactions between buyers and sellers. They were called the “intermediaries.” In layperson’s terms, they were simply the middlemen.
But, as we made a shift from paper money to digital money, this traditional industry got reshaped. That’s because a new kind of intermediary sprung up. These new middlemen chose to be called “fintech companies.”
Down at the Silicon Valley, “fintech” is a hot buzzword. A plethora of digital payments processing startups have emerged—each one adding a new flavor to the mix with its own secret sauce—such as Paypal Holdings Inc (NASDAQ:PYPL), Square Inc (NYSE:SQ), and First Data Corp (NYSE:FDC), to name just a few.
Global Payments is one such fintech, but you’ll be surprised to know that it has been around for nearly half a century. So, while fintech startups like PayPal and Square have become eye candy on Wall Street for garnering faddish appeal, this oldie presumably remains boring for Wall Street boys. That is why you don’t find much press on it.
The reality, however, is that GPN stock has delivered better returns than most fintech stocks that are supposedly considered “happening.”
Now, the business model of Global Payments is simple. The company provides nearly all sorts of payment solutions, making it easy for medium- and small-sized businesses to accept payments from customers, whether online or in-store, be it in local or foreign currencies, and via card, check, or mobile.
In short, the company covers virtually all modes of payments. And that’s not all; it also provides its clients with support for payroll and analytics, allowing them to efficiently keep tabs on all money-related operations.
One of the most popular of its solutions is its point-of-sale (POS) devices. Here’s how it works: Global Payments sets up its payment servicing terminals for merchants at points-of-sale (or simply their checkout counters). Customers then pay via credit or debit card, and the payment is received and processed through the Global Payments terminal.
Yes, it’s the same technology you use to pay for groceries at the local superstore. But the best part is that you’ll find Global Payments POS devises at just about any kind of business, from variety stores to restaurants, cafes, clubs, salons, and even casinos.
Likewise, foreign currency payments are processed with ease through the company’s network, allowing smaller merchants to easily conduct business with foreign customers. Plus, its mobile payments solution “Android Pay”—with which customers can pay for purchases using “Android” smartphones—is also getting popular.
Basically, Global Payments serves a niche of small- and medium-sized enterprises (SMEs) through a huge force of its field agents, who provide merchants with one-on-one customer service support.
Why Global Payments Stock Is Worth Watching
What’s more, exactly a year ago, something interesting happened. Global Payments closed a merger with one of the biggest payments servicing companies in the U.S., Heartland Payment Systems, Inc. (NYSE:HPY).
Up until then, Heartland was separately doing the same business as Global Payments. It made economic sense for them to unite and take on the bigger sharks in the pool. In business jargon, that’s what we call “unlocking synergies”—the same as two frail boys joining forces to take down the big bully on the field.
Just look at the company’s last quarter alone. A staggering $817.0 million was made in revenue, which is close to a third of Mastercard Inc’s (NYSE:MA) same-quarter revenue of $2.76 billion. So this is no small company, by any measure.
Also, this revenue figure was a jump of over 57% from the same period last year. And, believe it or not, the total annual volume of payments serviced on Global Payments’ network stood at a whopping $130.0 billion in the last year alone. Needless to say, these remarkable numbers are the very outcome of said synergies, making GPN stock one of the best digital payments stocks out there.
Likewise, it’s no shocking revelation that the GPN stock performance has been stunning following the Heartland merger. GPN stock is up nearly 17% in just four months year-to-date, and I’m not shy in calling it the top fintech stock in the bunch.
Chart courtesy of StockCharts.com
If you look at the above GPN price chart, a vivid uptrend is in sight. Also, the moving average convergence/divergence (MACD) indicator is giving off a green signal as it forms a bullish cross with the price signal line. Naturally, these signals have reached Wall Street, where analysts are finally waking up and adding Global Payments stock to their recommendation lists.
But, above all of this, the most noteworthy of reasons that I find Global Payments stock to be a top digital payments stock is its two-pronged strategy to return value to stockholders.
It rewards loyal investors with both dividends and share buybacks. It’s paying about $0.04 apiece in dividends for a yield of 0.05%, and has announced a $300.0-million share repurchase program just this month.
All in all, Global Payments stock is worth a second look, as it races to become the next MasterCard stock. Here’s a quick review of the company’s fundamentals:
- its revenue is growing;
- it pays dividends;
- it repurchases shares;
- it serves 30 countries worldwide;
- nearly 75% of revenue comes from U.S. and Canada;
- it serviced $130.0 billion in annual payments in 2016; and
- it emerged as one of the biggest digital payments processing companies after a merger with Heartland Payment Systems.
Final Word on Global Payments (GPN) Stock
If you’re paying attention, the duopoly of long-established payment processors—MasterCard and Visa Inc (NYSE:V)—is giving way to competition from Silicon Valley’s hipper mobile and digital payment apps.
Global Payments is one fintech that does a little bit of everything. I call it a jack of all trades. Its strength lies in serving a niche of medium- and small-sized businesses in locations where newer fintech companies haven’t yet reached.
In a nutshell, GPN stock is a top digital payments stock with nearly everything going in its favor. There is, however, a little hitch. Some company insiders were found selling the stock in the latest quarter. The average price they sold it for hovered around $77.00–$80.00. This is where the stock has historically found resistance. So, a good time to get in on this investment might be during a dip.
Nonetheless, Global Payments stock deserves to go on your radar.