Key takeaways
View moreFiserv appears slightly undervalued based on its strong financial performance, robust growth prospects, and attractive valuation multiples compared to industry averages. The company's EV/EBITDA of 13.35 is below the industry average of 18.31, suggesting potential for valuation expansion. However, the magnitude is considered small due to some offsetting factors such as increasing financial leverage and reliance on acquisitions for growth.
- Fiserv's strong financial performance, driven by organic growth and acquisitions, positions it as a key player in the financial services technology industry.
- The company's robust cash flow generation and efficient working capital management support its financial stability and growth potential.
- Fiserv's strategic focus on data and intelligence capabilities is emerging as a key growth driver, enabling the company to provide value-added solutions to clients.
- The company's international expansion plans, particularly in emerging markets, hold significant potential for future growth.
- While Fiserv exhibits strong financial health, investors should monitor potential risks related to increasing financial leverage, reliance on acquisitions, and market dependence.
Evaluation summary
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Company Overview:
- Fiserv, Inc. (FI) is a leading provider of financial services technology, offering a comprehensive suite of solutions for financial institutions, merchants, and consumers. The company operates through three segments: Merchant Acceptance, Financial Technology, and Payments and Network.
- The Merchant Acceptance segment provides commerce enabling solutions, serving merchants of all sizes globally. This segment contributes significantly to FI's revenue, as evidenced by the strong growth in Clover revenue, which grew 28% in Q2 2024.
- The Financial Technology segment offers technology solutions for financial institutions, enabling them to process customer deposit and loan accounts. This segment also contributes significantly to FI's revenue, with accelerated organic revenue growth of 8% in Q2 2024.
- The Payments and Network segment provides services to financial institutions and corporate clients, enabling digital payment transactions. This segment plays a crucial role in FI's overall strategy, as the company continues to invest in its payments infrastructure and expand its reach in the digital payments space.
- For comparative analysis, FI is benchmarked against the Financial Select Sector SPDR Fund (XLF) and industry peers Global Payments, Inc. (GPN) and Fidelity National Information Services, Inc. (FIS).
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Financial Performance:
- Fiserv's revenue has been consistently growing, reaching $5,107 million in Q2 2024, representing a 7% year-over-year increase. This growth is driven by a combination of organic growth and acquisitions.
- The company's profitability has been improving, with adjusted operating margin expanding 160 basis points to 38.4% in Q2 2024. This reflects the company's ability to control operating expenses and benefit from revenue growth.
- Fiserv's adjusted earnings per share (EPS) grew 18% year-over-year to $2.13 in Q2 2024, exceeding analyst expectations.
- The company's return on assets (ROA) has been consistently above the industry average, reaching 4.04% in Q2 2024. This indicates efficient asset utilization and strong profitability.
- Similarly, Fiserv's return on equity (ROE) and return on invested capital (ROIC) have been consistently higher than industry averages, reflecting the company's strong financial performance and ability to generate returns for shareholders.
- Recent news highlights Fiserv's strong financial performance, with analysts praising the company's ability to deliver double-digit growth in adjusted EPS and continued margin expansion.
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Operational Efficiency:
- Fiserv's balance sheet analysis reveals a strong liquidity position, with increasing current assets and a current ratio consistently above the industry average. This indicates the company's ability to meet short-term obligations.
- The company's working capital management is efficient, with a positive working capital balance, indicating a healthy cash flow cycle.
- Fiserv's cash flow from operations has been consistently strong, reaching $1,358 million in Q2 2024. This reflects the company's ability to generate cash from its core business operations.
- The company's free cash flow has also been growing, reaching $1 billion in Q2 2024. This indicates a healthy cash flow generation capacity and the company's ability to invest in growth initiatives and return value to shareholders.
- Fiserv's capital expenditure has been aligned with depreciation trends, indicating a balanced approach to investment and asset management.
- The company has not paid dividends in recent quarters, but its strong free cash flow generation capacity suggests potential for future dividend payments or share repurchases.
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Growth Opportunities:
- Fiserv is actively pursuing growth opportunities through market expansion, R&D initiatives, and strategic acquisitions.
- The company is expanding its international presence, with plans to launch pilots in Brazil, Mexico, and Australia in the second half of 2024. This expansion strategy targets emerging markets with significant growth potential.
- Fiserv is investing in new solutions, such as its dedicated platform for paybacks, and is integrating its solutions across its two segments. This focus on innovation and product development is expected to drive future growth.
- The company's strategic focus areas include leveraging its data and intelligence capabilities to provide value-added solutions to clients. This focus on data-driven insights is expected to drive future growth and enhance customer engagement.
- Fiserv's capital allocation strategy is aligned with its growth objectives, with investments in R&D, acquisitions, and international expansion. This strategic allocation of capital is expected to drive long-term value creation.
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Recent Developments and Market Sentiment:
- Recent news highlights Fiserv's strong financial performance, strategic initiatives, and expansion plans. The company's focus on data and intelligence capabilities is emerging as a key growth driver.
- Market sentiment is positive, reflecting confidence in Fiserv's ability to navigate macroeconomic challenges and maintain its growth trajectory. Analysts are impressed by the company's resilience and adaptability in responding to changes in the macroeconomic environment.
- The company's data and intelligence capabilities are emerging as a potential growth driver, as Fiserv looks to leverage its vast data assets to provide value-added solutions to clients.
- Fiserv's strategic initiatives, such as the integration of its solutions and the expansion of its financial institution partnerships, position the company well for continued success.
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Risks and Threats:
- Fiserv's increasing financial leverage could pose a risk if the company's profitability declines. The company's debt/EBITDA ratio has been increasing, indicating a higher level of financial leverage.
- The company's reliance on acquisitions could lead to integration challenges or overpaying for assets. The company's recent acquisitions have been a key driver of growth, but successful integration is crucial for long-term success.
- The company's decreasing intangible assets and total equity are potential red flags that should be monitored. This trend could indicate a shift in the company's investment strategy or potential challenges in maintaining its competitive advantage.
- The company's dependence on the payments industry exposes it to regulatory risks and potential changes in consumer behavior. The payments industry is subject to evolving regulations and competition, which could impact Fiserv's business.
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Valuation Analysis:
- Fiserv's EV/EBITDA ratio has been consistently lower than the industry average, indicating a potentially attractive valuation. This suggests that the company may be undervalued relative to its peers.
- The company's EV/Sales ratio has also been lower than the industry average, further supporting the notion of a potentially attractive valuation.
- Potential catalysts for future growth include the company's expansion into new markets, the development of new solutions, and the continued growth of the digital payments industry. These catalysts could drive further valuation expansion.
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Price Performance:
- Fiserv's stock price has been consistently outperforming the Financial Select Sector SPDR Fund (XLF) over all the periods analyzed. This indicates a strong track record of outperformance relative to the broader financial sector.
- The company's stock price has also been outperforming its peers, Global Payments, Inc. (GPN) and Fidelity National Information Services, Inc. (FIS), over most periods. This suggests that Fiserv's stock is a strong performer within the payments and financial technology industry.
- Recent price movements have been influenced by the company's strong financial performance, strategic initiatives, and positive market sentiment.
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Future Outlook:
- Fiserv's management has provided guidance for 2024, expecting organic revenue growth of 15% to 17% and adjusted EPS growth of 15% to 17%. This guidance reflects the company's confidence in its ability to maintain its growth trajectory.
- Analyst estimates for Fiserv's stock price are generally positive, with a consensus price target suggesting potential upside from current levels.
- Recent news and developments suggest that Fiserv is well-positioned for continued growth and profitability in the coming quarters. The company's strong financial position, robust cash flow generation, and strategic initiatives position it well to navigate macroeconomic challenges and capitalize on growth opportunities.
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Summary:
- Fiserv, Inc. (FI) is a financially healthy company with a strong competitive position in the financial services technology industry. The company's robust financial performance, operational efficiency, and strategic initiatives position it well for continued growth and profitability.
- Strengths: Strong financial performance, robust cash flow generation, efficient working capital management, strategic focus on data and intelligence capabilities, and a strong track record of outperformance.
- Weaknesses: Increasing financial leverage, reliance on acquisitions, and potential integration challenges.
- Opportunities: Market expansion, particularly in emerging markets, development of new solutions, and continued growth of the digital payments industry.
- Threats: Evolving regulations in the payments industry, competition from other technology providers, and potential economic downturns.
- Fiserv's valuation is potentially attractive, with its EV/EBITDA and EV/Sales ratios lower than industry averages. The company's strong financial performance, growth potential, and positive market sentiment suggest potential for further valuation expansion.
- Investors should monitor the company's financial leverage, acquisition strategy, and dependence on the payments industry.
- Overall, Fiserv is a well-positioned company with a strong track record of performance and a promising future outlook. The company's focus on innovation, data-driven insights, and strategic expansion positions it well to capitalize on the growth opportunities in the financial services technology industry.
Price history
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Fundamentals
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Insights
- Fiserv is a financially healthy company with strong revenue growth, profitability, liquidity, and solvency.
- The company's financial performance is significantly better than the industry average, indicating a strong competitive position.
- The company's focus on organic growth and acquisitions is expected to continue to drive revenue and profitability growth.
- The company's strong financial position provides it with the financial flexibility to invest in its business and expand into new markets.
- The company's decreasing intangible assets and total equity are potential red flags that should be monitored.
Analysis
- Revenue
- Fiserv's revenue is experiencing strong growth, driven by a combination of organic growth and acquisitions.
- The company's revenue growth is significantly higher than the industry average, indicating a strong competitive position.
- The company's revenue growth is expected to continue in the coming quarters, as it continues to invest in its business and expand into new markets.
- Profitability
- Fiserv's profitability is strong and improving, as evidenced by its increasing gross profit margin, operating margin, net profit margin, return on average assets, return on average total equity, and return on average total capital.
- The company's profitability is significantly higher than the industry average, indicating a strong competitive position.
- The company's profitability is expected to continue to improve in the coming quarters, as it continues to control operating expenses and benefit from the growth in revenue.
- Liquidity
- Fiserv has a strong liquidity position, as evidenced by its increasing current assets and current ratio.
- The company's liquidity is significantly higher than the industry average, indicating a strong ability to meet short-term obligations.
- The company's liquidity is expected to remain strong in the coming quarters, as it continues to generate cash flow from operations.
- Solvency
- Fiserv's financial leverage is increasing, as evidenced by its increasing total debt to total equity ratio and debt/EBITDA ratio.
- The company's solvency is strong, as evidenced by its increasing cash flow from operations and free cash flow margin.
- The company's solvency is slightly higher than the industry average, indicating a strong ability to meet long-term obligations.
- The company's solvency is expected to remain strong in the coming quarters, as it continues to generate cash flow from operations and manage its debt.
- Operational Efficiency
- Fiserv's operational efficiency is improving, as evidenced by its increasing return on average assets and return on average total capital.
- The company's efficiency is significantly higher than the industry average, indicating a strong ability to generate revenue from its assets.
- The company's operational efficiency is expected to continue to improve in the coming quarters, as it continues to invest in its business and expand into new markets.
- Cash Flow Analysis
- Fiserv's cash flow from operations is strong and increasing, driven by strong net income growth and stable depreciation and amortization.
- The company's free cash flow is also strong and increasing, indicating a healthy cash flow generation capacity.
- The company's cash flow from operations and free cash flow are significantly higher than the industry average, indicating a strong ability to generate cash flow.
- The company's cash flow is expected to continue to grow in the coming quarters, as it continues to invest in its business and expand into new markets.
- Risk Factors
- The company's decreasing intangible assets and total equity are potential red flags.
- The company's increasing financial leverage could pose a risk if the company's profitability declines.
- The company's reliance on acquisitions could lead to integration challenges or overpaying for assets.
- Future Outlook
- Fiserv is well-positioned for continued growth and profitability in the coming quarters.
- The company's strong financial position, robust cash flow generation, and strategic initiatives position it well to navigate macroeconomic challenges and capitalize on growth opportunities.
- The company's focus on organic growth and acquisitions is expected to continue to drive revenue and profitability growth.
- The company's strong liquidity and solvency position provide it with the financial flexibility to invest in its business and expand into new markets.
- Profitability
Financial statements
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Public filings
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Earnings calls
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Earnings Report 2024Q2 (2024-07-24)
Key takeaways
- Fiserv delivered strong financial performance in Q2 2024, with double-digit growth in adjusted earnings per share and continued margin expansion.
- The company's revenue growth was driven by strong performance across its business segments, including accelerated growth in Clover and the financial solutions segment.
- Fiserv is expanding its international presence, with plans to launch pilots in new markets, and is investing in new solutions to drive future growth.
- Management expressed confidence in the company's ability to navigate macroeconomic challenges and maintain its growth trajectory, highlighting Fiserv's resilience and adaptability.
- The company's data and intelligence capabilities are emerging as a potential growth driver, as Fiserv looks to leverage its vast data assets to provide value-added solutions to clients.
- Fiserv's strategic initiatives, such as the integration of its solutions and the expansion of its financial institution partnerships, position the company well for continued success.
Summary
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Financial Performance:
- Fiserv delivered strong Q2 2024 results, with adjusted earnings per share of $2.13, up 18% year-over-year.
- Adjusted revenue grew 7%, and adjusted operating margin expanded 160 basis points to 38.4%.
- Organic revenue growth was 18%, exceeding the high end of the company's 2024 guidance range.
- The company raised its full-year adjusted EPS outlook to $8.65 to $8.80, an increase of $0.05 across the range.
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Revenue Drivers:
- Clover revenue grew 28%, and the company saw accelerated organic revenue growth in the financial solutions segment at 8%.
- Fiserv signed multiple new clients, including Verizon and Apple, and expanded its presence in key verticals such as petro, gaming, government, and healthcare.
- The company's free cash flow was $1 billion in the quarter and $4 billion over the last 12 months.
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Profit Margins and Cost Management:
- Adjusted operating income grew 12% to $1.8 billion, resulting in an adjusted operating margin of 38.4%, up 160 basis points year-over-year.
- The company expects more than 135 basis points of adjusted operating margin expansion for the full year, up from the previous guidance of at least 125 basis points.
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Guidance and Outlook:
- Fiserv maintained its 2024 organic revenue growth outlook of 15% to 17%, despite a lower contribution from excess inflation and interest in Argentina.
- The company raised its full-year adjusted EPS growth outlook to 15% to 17%, up from the previous guidance of 14% to 16%.
- Fiserv expects free cash flow to be $4.7 billion for the full year, up from the previous guidance of $4.5 billion.
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Strategic Initiatives:
- Fiserv is celebrating its 40th anniversary and the 5th anniversary of the merger between Fiserv and First Data.
- The company is expanding its international presence, with plans to launch pilots in Brazil, Mexico, and Australia in the second half of 2024.
- Fiserv is investing in new solutions, such as its dedicated platform for paybacks, and is integrating its solutions across its two segments.
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Management Commentary:
- CEO Frank Bisignano highlighted Fiserv's vision to become a partner of choice with unparalleled global reach, and the company's ability to deliver a breadth of leading products across a diverse base of clients.
- CFO Bob Hau emphasized Fiserv's resilience and adaptability in responding to changes in the macroeconomic environment.
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Industry and Market Conditions:
- Fiserv noted a slowdown in small business volume growth and enterprise transaction growth in Q2, but stated that this was in line with their expectations.
- The company is seeing a slowdown in credit originations across its retail, private label, and general-purpose portfolios.
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Q&A Session Highlights:
- Analysts inquired about the sources of margin upside, the performance of the merchant processing business, and the growth drivers in the financial solutions segment.
- Management provided detailed explanations on these topics, highlighting the company's ability to scale, drive productivity, and capitalize on various growth opportunities.
Comparative analysis
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Benchmarks (as of 2024-10-18)
Financial Select Sector SPDR Fund (XLF)
- Performance Comparison:
- FI has consistently outperformed XLF over all the periods analyzed, with the difference in performance being particularly significant over the longer periods. For example, FI has outperformed XLF by 53.42% over the past three years.
- FI's performance has been consistently better than XLF's performance, indicating a strong track record of outperformance.
- Risk and Return Analysis:
- FI has provided higher annualized returns than XLF over all the periods analyzed. For example, FI's annualized return over the past three years is 21.44% compared to XLF's 7.91%.
- FI has been more volatile than XLF over the past three years. This is evident in the higher annualized volatility figures for FI.
- FI's maximum drawdown of 30.16% is significantly higher than XLF's maximum drawdown of 25.81%. This suggests that FI is more susceptible to significant price declines than XLF.
- Risk-Adjusted Performance:
- FI's Sharpe Ratio has been consistently lower than XLF's Sharpe Ratio over the past three years. This indicates that XLF has offered a better risk-adjusted return than FI.
- FI's beta of consistently below 1 suggests that it is less sensitive to market movements than XLF. This indicates that FI is less risky than XLF.
- Overall Assessment:
- FI has consistently outperformed XLF in terms of returns, but it has also been more volatile and has experienced larger drawdowns. This suggests that FI may be a more risky investment than XLF.
- FI's lower beta suggests that it is less sensitive to market movements than XLF, which could be considered a positive factor for investors seeking lower risk.
- However, FI's lower Sharpe Ratio indicates that XLF has offered a better risk-adjusted return than FI.
- Overall, FI's performance has been strong, but its higher volatility and larger drawdowns suggest that it may be a more risky investment than XLF.
Peers Price History(as of 2024-10-18)
- Performance Comparison:
- FI has consistently outperformed GPN across all periods, demonstrating a strong track record of outperformance. However, FI has underperformed FIS in some periods, particularly in the 1-year and YTD periods. This suggests that FI's performance is not consistently superior to all peer companies.
- Risk and Return Analysis:
- FI has provided higher annualized returns than GPN across all periods, indicating that it has generated stronger returns. However, FI's annualized returns have been lower than FIS in the 1-year period.
- FI has shown lower annualized volatility than GPN and FIS across all periods, suggesting that it is less risky. This is further supported by its lower maximum drawdown compared to the peer companies.
- FI's maximum drawdown of 30.16% is significantly lower than GPN's 56.97% and FIS's 67.88%. This indicates that FI has been more resilient to market downturns and has a lower risk profile.
- Risk-Adjusted Performance:
- FI's Sharpe ratio has consistently been higher than GPN and FIS, indicating that it has been offering better risk-adjusted returns. This suggests that FI has been able to generate higher returns for a given level of risk.
- FI's beta value has consistently been below 1, indicating that it is less sensitive to market movements than the overall market. This suggests that FI is less volatile and less risky than the broader market.
- Overall Assessment:
- FI has demonstrated strong performance, consistently outperforming GPN and offering better risk-adjusted returns than both peer companies. However, its performance has not been consistently superior to FIS. FI's lower volatility and lower maximum drawdown suggest a lower risk profile compared to its peers.
- FI's consistent outperformance, lower volatility, and higher Sharpe ratio make it an attractive investment option for investors seeking a balance of risk and return. However, investors should consider its underperformance relative to FIS in some periods and monitor its future performance to assess its long-term growth potential.
Peers Fundamentals(as of 2024-06-30)
- Market Position and Size:
- FI is the largest company in the peer group, with a market cap nearly four times larger than GPN and twice as large as FIS. This suggests that FI holds a dominant market position within the financial services technology industry.
- FI's market cap is significantly larger than its peers, which is reflected in its larger revenue, EBITDA, and net income.
- Profitability and Efficiency:
- FI exhibits strong profitability metrics, exceeding both peer and industry averages. Its Gross Profit Margin, EBITDA Margin, and Net Profit Margin are all significantly higher than its peers and the industry average.
- FI demonstrates strong efficiency in generating returns, exceeding both peer and industry averages. Its Return on Average Assets, Return on Average Total Equity, Return on Average Total Capital, and Return On Average Invested Capital are all impressive.
- Financial Health and Stability:
- FI exhibits a strong liquidity position, exceeding the industry average but falling slightly short of its peers.
- FI's debt levels are higher than its peers and the industry average, suggesting that FI may be taking on more risk to fuel its growth, which could potentially impact its financial stability in the future.
- Valuation and Market Perception:
- FI's valuation metrics are mixed, exceeding peers in some areas but falling short in others. Its Enterprise Value To Sales and Price To Sales Ratio are higher than its peers and the industry average, suggesting that the market values FI's revenue generation capabilities more highly than its peers and the industry.
- FI's valuation is generally higher than its peers, suggesting that the market has a positive view of its growth prospects and profitability. However, its valuation is lower than the industry average in some areas, indicating that the market may be pricing in some risk factors.
- Cash Flow and Capital Management:
- FI generates strong cash flow, exceeding its peers and the industry average. Its Net Operating Cash Flow and Free Cash Flow are significantly higher than its peers, demonstrating FI's ability to generate substantial cash from its operations.
- FI's Total Capital Expenditure is higher than its peers, indicating that FI is investing heavily in its growth.
- Growth and Future Prospects:
- FI exhibits strong growth trends, exceeding the peer group average in several key metrics. Its revenue, EBITDA, and net income have consistently grown at a higher rate than the peer group average over the past five years.
- FI's growth rates have been consistently increasing over the 5-year period for revenue, EBITDA, and net income. This suggests that FI's growth is sustainable and likely to continue in the future.
- FI's most recent year-over-year growth rates are higher than its 5-year CAGRs for revenue, EBITDA, and net income. This indicates that FI's growth is accelerating, suggesting that its competitive position is strengthening.
- Potential for Investment:
- FI presents an attractive investment opportunity, given its strong financial performance, dominant market position, and growth potential. Its profitability, efficiency, and cash flow generation are all impressive, demonstrating its ability to manage its resources effectively and generate strong returns for its shareholders.
- FI's consistent growth across multiple key metrics suggests that its growth is sustainable and likely to continue in the future. Its ability to scale its operations efficiently and generate strong returns for its shareholders, despite its large size, further reinforces its growth potential.
- However, investors should be aware of FI's higher debt levels and potential for growth rate fluctuations. These factors could potentially impact its financial stability and growth trajectory in the future.
- Key Risks and Considerations:
- FI's higher debt levels could potentially impact its financial stability and growth trajectory in the future.
- FI's growth rate fluctuations, while not consistently decreasing, suggest that its growth may not be as smooth as it appears.
- Overall Assessment:
- FI is a financially healthy and well-performing company with a strong competitive position in the financial services technology industry. Its profitability, efficiency, and cash flow generation are all impressive, demonstrating its ability to manage its resources effectively and generate strong returns for its shareholders.
- However, investors should be aware of its higher debt levels and potential for growth rate fluctuations.
Comparison metrics
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