Total System Services Stock on Beautiful Upward Ride

TSS stockWall Street Jumps on Total System Services Bandwagon

The rise in global commerce will only grow, despite some of the talk you may hear. The global marketplace is flat, and is closely linked with the rise in e-commerce, which provides great tailwinds for payment processing companies like Total System Services, Inc. (NYSE:TSS).

The company offers payment processing, merchant services, and associated payment services to financial and non-financial institutions around the world in the Americas, Europe, Africa, and the Asia-Pacific region.

Total System Services essentially provides the backbone for buyers and sellers to transact with each other in an effective and secure manner.

TSS stock recently traded at a record high of $60.21 and it appears to be breaking out on the chart. Yes, the stock has underperformed compared to the S&P 500 over the past year, but it has been coming on stronger this year, with an upward move of 22.3%.

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My Fundamental and Technical Bull Case for TSS Stock

I will talk more about the technical picture for TSS shares later, but first let’s take a brief look at the underlying fundamentals. Revenues have grown in the last two years from $2.44 billion in 2014, to $2.78 billion in 2015, to $4.17 billion in 2016.

What’s impressive was that revenues surged 50% in 2016 versus 13.6% in 2015.

While the projected growth is expected to slow to 10.5% and 5.50% in 2017 and 2018, respectively, the metrics are still great for a company of this size. (Source: “Total System Services, Inc. (TSS),” Yahoo! Finance, last accessed May 26, 2017)

Moreover, if the global economy accelerates at a quicker pace, Total System Services could deliver much higher growth.

Also catching my eye was the strong expansion in gross margins over the last few years, as reflected in the table. Higher gross margins imply that Total System Services is doing a great job controlling the expense side.

Gross Margins

  • 2014: 31.70%
  • 2015: 33.24%
  • 2016: 42.61%

The sell side appears to be bullish, with three analysts recently making upward earnings per share (EPS) revisions for 2017 and six analysts revising EPS higher for 2018. This upward revision in earnings is often indicative of beats down the road, resulting in a higher share price.

Now let’s look at the technical picture. The monthly chart shows TSS stock beginning its eight-year bull rally at roughly the same time as the S&P 500 rally, as shown by the steady uptrend channel above the 50-day moving average.

TSS stock chart

 

Chart courtesy of StockCharts.com

Total System Services stock displayed a major golden cross pattern around the $20.00 level in early 2013, followed by several chart breakouts at $23.20 and $32.50.

TSS price chart

Chart courtesy of StockCharts.com

The daily chart of TSS stock displays the recent breakout at $55.00 on an upside trading gap, which is looking to propel the stock much higher.

Extending the trend line forward, and based on the past breakouts, I wouldn’t be surprised to see Total System Services stock move toward the $70.00–$80.00 level.