Global Payments Inc. [NYSE: GPN] ended last week in the green closing Friday trading up by 3.70%. This was driven by news that it was buying Total System Services for $21.5 billion in stock. The market is quite bullish on this news, and GPN is on a bullish reversal on the 5-day chart. If it opens today’s trading in the green, then it could possibly break weekly resistance at $153.85 on the 50-day MA. This bullish momentum is confirmed on the monthly charts where it has established a clear bull trend, with the 50-day MA offering key long-term support at $141.42. GPN’s bullish sentiment is driven by the stronger fundamentals that will come with this buyout.
Total System Services is the largest issuer processor in the U.S, and manages 40% of Visa and MasterCard’s American business. With this acquisition, Global Payments is now in charge of this business. It gives the company a bigger share of the $100 billion payments market, and follows closely in the steps of other players who are also consolidating their business.
Besides, this deal, GPN’s books paint the picture of a fundamentally strong company. For instance, the company’s revenues are growing consistently. Its quarter revenues (yoy) are up 11.10%. That’s a good indicator that there is healthy demand for its products. The best part is that, GPN is making money off its sales. The company has a profit margin of 13.69% on revenues of $3.45 billion.
Another of GPN’s fundamental strengths is it seems to have enough current assets to cover its liabilities within this financial year. But it’s not just debts that this company is in a good position to pay, it is also well positioned to pay its operational expenses. This is evident in its operating cash flow of $1.05 billion. The company’s levered free cash flow of $971.57 million means that it is well capitalized to take advantage of new opportunities as they come up. The return on equity is quite good too, standing at 12.23%, and have grown by 22.90% quarter-over-quarter.
GPN’s high beta also means that when the market is performing well, GPN is likely to outperform. For instance, in the last 52-weeks, GPN has returned 35.32%, while the S&P 500 has returned 4.92%. In essence, as long as the S&P 500 keeps performing well, high beta stocks like GPN are likely to perform better. For GPN, its strengthening fundamentals could play a role in pushing up its gains much higher.
It’s not surprising that some analysts have a very bullish outlook for this stock. Several analysts have upgraded their outlook for GPN this year. The most significant one is Goldman Sachs, which upgraded it from neutral to buy. Several of them also maintain their positive outlook. Barclays maintains GPN at overweight, same as KeyBanc.