Trading On margin

Recent sale creates compelling risk-reward ratio, says Raymond James

Investors were not very happy Global Payments’ (GPN) latest quarterly statement, sending shares down 9% in the following session. But is the sale justified?

Despite exiting Russia — which will result in around $20 million and additional negative currency headwinds — the company maintained its 2022 outlook. Specifically, revenue is still expected to be between $8.42 billion. and $8.5 billion in 2022, a growth of 9 to 10%. Adj. EPS is also expected to climb 16% to 19% and reach between $9.45 and $9.67.

There was also a ground beat in the first quarter with adj. EPS hitting $2.07, just above Wall Street expectations of $2.04. However, GPN slightly missed revenue, with revenue rising 7.7% year-over-year to $1.95 billion, just below the consensus estimate of 1.96. billion dollars.

John Davis of Raymond James calls the first quarter impression ‘mixed’, pointing out that operating profits also ‘just missed’ Street’s expectations and came in at $803 million from 805’s forecast. millions of dollars. And even though the operating margin increased by 50 basis points year over year, the street expected an expansion of about 10 basis points.

That said, with merchant volumes posting a healthy 18% year-over-year increase, the stage is set for “accelerated growth in 2H and in fiscal 23/24.” There’s also the potential sale of Netspend, a consumer debit card company, which could “pave the way for further deployment of capital.”

But more than anything, for Davis, following the recent sell-off, the stock’s valuation is “just too attractive.”

“GPN offers one of the most compelling risk/reward in our coverage, in our opinion,” the analyst said. “Consider the stock is trading at just 11x our FY23 estimates, despite sustained growth in teenage EPS. capitalization (0.6x).

As such, Davis maintains an Outperform (i.e. Buy) rating, as well as a price target of $190. Therefore, the analyst expects the stock to change hands at a premium of 48% over the next 12 months. (To view Davis’ track record, Click here)

Most of Davis’ colleagues agree; With the exception of two skeptics, the other 15 recent reviews are buys, making the consensus rating here a strong buy. The forecast calls for 41% gains over 12 months, considering that the average price target stands at $181.13. (See GPN stock forecast on TipRanks)

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Disclaimer: Opinions expressed in this article are solely those of the featured analyst. The Content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.