Global Payments Inc. (GPN - Get Rating) in Atlanta, Ga., is a Fortune 500 payments technology company that operates in more than 100 countries across the Americas, Europe, and the Asia Pacific. The company operates through three segments: Merchant Solutions; Issuer Solutions; and Business and Consumer Solutions.

Shares of GPN have risen 6.8% in price over the past three months on the back of better-than-expected fiscal 2021 fourth-quarter earnings results and impressive growth prospects. GPN has been rapidly adopting the latest trends to boost its leadership in the fintech industry. Regarding this, GPN CEO Jeffrey Sloan said, “We are right in the nexus’ of the buy now, pay later boom.”

However, the company’s operations are susceptible to macroeconomic headwinds, such as pandemic-fueled operational disruptions and immense competition in the fintech space. Furthermore, given the Fed’s hawkish tilt, GPN’s cost of acquisitions might increase substantially. This, coupled with the surging market volatility, caused the stock to slump 5.2% in price over the past month.

Here’s what could shape GPN’s performance in the near term:

Mixed Profit Margins

GPN’s 56.18% trailing-12-month gross profit margin is 13.3% higher than the 49.58% industry average. In addition, the company’s 11.33% and 32.73% respective trailing-12-month net income margin and levered free cash flow margin compare with 6.29% and 10.45% industry averages.

However, GPN’s 3.65% trailing-12-month ROE is 53.7% lower than the 7.88% industry average. And its 2.88% trailing-12-month ROTC is 42.5% lower than the 5% industry average, while its 2.13% ROA is 44.8% lower than the 3.86% industry average. Also, the company’s 0.19% trailing-12-month asset turnover is 70.3% lower than the 0.64% industry average.

Mixed Valuation Metrics

In terms of forward P/E, GPN is currently trading at 14.26x, which is 27.6% lower than the 19.69x industry average. Its 0.83 forward non-GAAP PEG ratio  is 43.4% lower than the 1.47 industry average. In addition, the stock’s 11.61 forward Price/Cash Flow multiple is 39% lower than the 19.06 industry average.  In comparison, its 12.24 forward EV/EBITDA ratio  is 10.5% lower than the 13.68 industry average.

However, GPN is currently trading at 4.53 times its forward Sales, which is 32.7% higher than the 3.41 industry average. Also, its 5.84 forward EV/Sales multiple is 60% higher than the 3.65 industry average.

Consensus Rating and Price Target Indicate Potential Upside

Among the 19 Wall Street analysts that rated GPN, 16 rated it Buy while three rated it Hold. The 12-month median price target of $187.00 indicates a 40.1% potential upside from yesterday’s closing price of $133.52. The price targets range from a low of $150.00 to a high of $240.00.

POWR Ratings Reflect Uncertainty

GPN has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

GPN has a C grade for Momentum and Stability. The stock is currently trading below its 50-day and 200-day moving averages of $140.99 and $160.91, respectively, indicating a downtrend, in sync with the Momentum grade. In addition, GPN’s slightly high 1.03 beta justifies the Stability grade.

Among the 52 stocks in the Consumer Financial Services industry, GPN is ranked #19.

Beyond what I’ve stated above, view GPN ratings for Growth, Sentiment, Value, and Quality here.

Bottom Line

The benchmark indexes have been slumping lately amid heightened geopolitical tensions and looming interest rate hike concerns. As a result, GPN, a constituent of the S&P 500 index, saw its stock fall 1.2% in price year-to-date. As geopolitical tensions worsen with Russia’s invasion of Ukraine, the benchmark indexes are expected to retreat further in the near term. Thus, we think investors should wait until the markets stabilize before investing in GPN.

How Does Global Payments Inc. (GPN) Stack Up Against its Peers?

While GPN has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Atlanticus Holdings Corporation (ATLC - Get Rating), Regional Management Corp. (RM - Get Rating), and 360 Finance, Inc. (QFIN - Get Rating), which have a B (Buy) rating.

GPN shares fell $6.52 (-4.88%) in premarket trading Thursday. Year-to-date, GPN has declined -1.23%, versus a -11.16% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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