Fidelity National Information Services, Inc. FIS is well poised to grow on the back of rising demand for digital payment solutions, a healthy product portfolio and digitization efforts. The growing global e-commerce market holds tremendous opportunity for the company.
Fidelity National — with a market cap of $34.1 billion — provides banking and payments technology solutions, processing services and information-based services to the financial services industry. Courtesy of solid prospects, this currently Zacks Rank #3 (Hold) stock is worth holding on to at the moment.
The Zacks Consensus Estimate for Fidelity National’s 2023 earnings is pegged at $5.95 per share, which improved 1.4% in the past month. During this time, FIS witnessed 12 upward estimate revisions and no movement in the opposite direction. The company beat on earnings in three of the last four quarters and missed once, the average being 2.3%.
Fidelity National Information Services, Inc. Price and EPS Surprise
Fidelity National Information Services, Inc. price-eps-surprise | Fidelity National Information Services, Inc. Quote
Furthermore, the consensus mark for revenues is pegged at $14.5 billion for 2023, almost flat year over year. While revenues from software licensing are likely to decline this year, the same from transaction processing and services, and professional services are anticipated to grow, offsetting the negatives.
Fidelity National’s valuation seems cheaper than the industry at the current level. Looking at its 12-month forward price-to-earnings multiple, investors might want to pay a higher premium. FIS currently has a ratio of 9.2X, much lower than the industry average of 21.2X.
The company expects promising growth from account-to-account payments in the coming days. This method is expected to decrease the cost of payment acceptance for merchants. It is crucial as the global e-commerce market is expected to hit around $8.5 trillion by 2026 despite the current volatility witnessed in economy.
Rising travel volumes are expected to benefit Fidelity National’s Merchant Solutions segment revenues. With consumer spending expected to witness a rapid recovery and cross-border transactions likely to improve over the coming quarters, the Merchant Solutions business will gain heavily.
FIS’ well-performing Banking and Capital Markets businesses are major positives. It focuses on top-tier strategic partnerships and future-proof underlying technologies to grow its operations. The company’s growing footprint in the crypto market is praiseworthy. It has partnered with cryptocurrency platforms like Crypto.com and OKCoin to support their respective global expansions. Further, its partnership with bitcoin-focused financial services and technology provider NYDIG is likely to increase traffic to its Digital One Mobile application.
Inorganic growth strategies like the Payrix acquisition help the company to scale its business, capture more market share and boost capabilities. Also, FIS does not shy away from shedding non-core assets to boost efficiency and profitability. Currently, it has plans to opt for a tax-free spin-off of its Merchant Solutions business.
There are a few factors that are impeding the stock’s growth lately.
Increasing costs are eating into its profits. Selling, general and administrative expenses saw a CAGR of 26% over the last five years ending 2022. The growing costs due to a multi-year modernization of platforms and applications are anticipated to keep its margins under pressure.
Also, its high long-term debt, excluding the current portion, of $13,905 million at the first-quarter end was significantly higher than the cash and cash equivalents of $1,871 million. Nevertheless, we believe that a systematic and strategic plan of action bodes well for the long run.
Some better-ranked stocks in the broader business services space are Remitly Global, Inc. RELY, Paysafe Limited PSFE and Repay Holdings Corporation RPAY, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Remitly Global’s 2023 earnings indicates a 7.4% increase from the prior-year reported number. Also, the consensus mark for revenues for the year indicates 36.8% growth.
The Zacks Consensus Estimate for Paysafe’s 2023 earnings is pegged at 65 cents per share, which witnessed one upward estimate revision over the past week against none in the opposite direction. PSFE’s earnings beat estimates in three of the last four quarters and met the mark once, the average surprise being 190.5%.
The Zacks Consensus Estimate for Repay Holdings’ 2023 bottom line has increased 1.3% in the past 60 days. RPAY’s earnings beat estimates in three of the last four quarters and met the mark once, the average surprise being 4.6%.
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