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Global Payments Q3 Earnings: Is NYSE:GPN Expensive at 133.4x Price/EPS?

in EARNINGS/INVESTING IDEAS by

Global Payments Inc. (NYSE:GPN) is scheduled to report Q3 earnings results before markets open for trading on October 29, 2020.

The company is expected to report earnings of $1.66/share on revenue of $1.725 billion. The consensus earnings per share (EPS) of $1.66/share is based on a poll of 32 analysts and represents a decline in eps of −2.5% over the same quarter last year, when the company reported earnings of $1.70/share.

The revenue forecast of $1.725 billion based on a poll of 28 analysts implies a year-over-year (YoY) growth in revenue of 48.6%. Last year the company reported $1.161 billion in revenue for the quarter.

Expected to report EPS contraction of −2.5% for Q3, 2020
Metric Expected Prior Year YoY Change
Revenue $1,725.48 $1,160.92 48.6%
EPS $1.66 $1.70 −2.5%

Earnings Call Trends

Management has been great at managing analyst expectations historically. The company has a perfect record over the last 8 tracked quarters of exceeding earnings guidance.

What are your expectations from Global Payments Inc. for earnings this quarter? Let us know in the comments!

Analyst Expected vs. Reported EPS
Quarter Expected Reported Surprise Result
Q2, 2020 $1.21 $1.31 8.1% Beat
Q1, 2020 $1.53 $1.58 3.2% Beat
Q4, 2019 $1.60 $1.62 1.5% Beat
Q3, 2019 $1.66 $1.70 2.4% Beat
Q2, 2019 $1.46 $1.51 3.3% Beat
Q1, 2019 $1.29 $1.34 3.6% Beat
Q4, 2018 $1.32 $1.33 0.6% Beat
Q3, 2018 $1.39 $1.44 3.4% Beat

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report. After the last earnings report for the period ending June 30, 2020, the stock price reacted by falling −2.1%.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
August 3, 2020 $178.02 $174.23 −2.1% Decline
May 6, 2020 $166.95 $174.76 4.7% Increase
February 12, 2020 $203.18 $202.73 −0.2% Decline
October 31, 2019 $165.54 $172.35 4.1% Increase

The other question to consider is one of earnings manipulation. There is a lot of pressure on management each quarter to deliver on earnings expectations. The Beneish M-Score is a statistical model that provides some insight into whether the company might be manipulating earnings. With a Beneish M-Score of −1.32, the model suggests that the company is likely an earnings manipulator. A value of −1.32 implies a 9.3% chance of earnings manipulation.

Fundamentals And Technical Analysis

Global Payments Inc. is currently trading at $168.80/share, down −4.6% for the day. The company is trading at approximately 80.5% of its 52-week high of $209.62/share. The company’s stock price is down −3.1% since the last earnings report and down −3.2% over the previous week. The company’s 14 Day Relative Price Index (RSI) of 43.22 suggests the company is trading in technically neutral territory. The RSI is considered overbought when above 70 and oversold when below 30.


NYSE:GPN Stock Price Chart
Source: Finbox

The current share price implies a price-to-earnings (P/E) multiple of 133.38 and a forward P/E multiple of 27.82.

Global Payments Inc.’s current share price also implies a price-to-book (P/B) multiple of 1.84. The following table summarizes some other key fundamental ratios:

Data as of October 27, 2020
Metric Value
Last Reported Fiscal Period Key FY2020.Q2
Period End Date June 30, 2020
Stock Price (Current) $168.80
P/E Ratio 133.4x
P/E Ratio (Fwd) 27.8x
PEG Ratio −2.6
Total Debt / Total Capital 15.6%
Levered Free Cash Flow $1.721 billion
EV / EBITDA 23.5x

Finbox

Global Payments Inc. is a large-cap stock with a market capitalization of $50.512 billion and a total enterprise value of $58.694 billion. The company operates in the Information Technology sector and the IT Services industry.

Global Payments Inc. provides payment technology and software solutions for card, electronic, check, and digital-based payments in North America, Europe, the Asia-Pacific, and Latin America. The company operates through three segments: Merchant Solutions, Issuer Solutions, and Business and Consumer Solutions. The Merchant Solutions segment offers authorization services, settlement and funding services, customer support and help-desk functions, chargeback resolution, terminal rental, sales and deployment, payment security services, consolidated billing and statements, and on-line reporting services. This segment also provides an array of enterprise software solutions that streamline business operations of its customers in various vertical markets; and value-added services, such as point-of-sale solutions, and analytic and engagement tools, as well as payroll services. The Issuer Solutions segment offers solutions that enable financial institutions and retailers to manage their card portfolios through a platform; and commercial payments and ePayables solutions for businesses and governments. The Business and Consumer Solutions segment provides general-purpose reloadable prepaid debit and payroll cards, demand deposit accounts, and other financial service solutions to the underbanked and other consumers, and businesses under the Netspend brand. It markets its products and services through direct sales force, trade associations, agent and enterprise software providers, referral arrangements with value-added resellers, and independent sales organizations. The company was founded in 1967 and is headquartered in Atlanta, Georgia.

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