Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche

Finance

Is Global Payments Making Money?

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Global Payments (NYSE: GPN) is one of several financial technology (Fintech) companies Mr. Market loves.

For instance, Mr. Market paid $199.64 for Global Payments (GPN) shares on 11 February 2021. The share price is steady, Mr. Market paid $204.64 for Global Payments on 10 February 2020.

Global Payments creates software that handles online payments, business-to-business payments, consumer payments, and issuer payments. Global Payments claims its customers include Seven11, Phillips 66 (NYSE: PSX), JP Morgan Chase (JPM), Wendy’s, PayPal (PYPL), US Bank (NYSE: USB), Yum! Brands (NYSE: YUM), Major League Baseball, Walmart (WMT), and the giant French grocer Group Carrefour.

Global Payments claims its products serve over 3.5 million businesses, 1,300 financial institutions, and over 600 million cardholders.

Does Global Payments Make Money?

Global Payments Inc. (GPN) makes money. It reported a $1.1017 billion quarterly gross profit and a $290.42 million quarterly operating income on 30 September 2020.

The quarterly operating income grew from $196.16 million on 31 December 2019. The quarterly gross profit rose from $949.18 million on 31 December 2019.

However, Global Payments’ quarterly revenues fell in 2020. Global payments reported quarterly revenues of $1.988 billion on 31 December 2019 that fell to $1.9178 billion on 30 September 2020.

How Much Cash Does Global Payments Generate?

Global Payments’ business generates some cash. It reported a quarterly operating cash flow of $584.47 million on September 30, 2020. The quarterly operating cash flow rose from $4.189 million on December 21, 2019.

Similarly, Global Payments reported a quarterly ending cash flow of $1.395 billion on 30 September 2020. The quarterly operating cash flow rose from -$449.34 million on 31 December 2019. Interestingly, Global Payments reported a quarterly ending cash flow of $1.8 billion on 31 March 2020.

Consequently, Global Payments had $2.221 billion in cash and short-term investments on 30 September 2020. The cash and short-term investments grew from $1.678 billion on 31 December 2019.

Global Payments Astonishing Growth

I think Global Payments’ astonishing levels of growth could be responsible for Mr. Market’s love of the stock.

Stockrow estimates that Global Payments (NYSE: GPN) revenue growth rate was 73.41% in the quarter ending on 30 September 2020. The revenue growth rate fell from 78.79% on 30 June 2020, 115.57% on 31 March 2020, and 125.74% on 31 December 2020.

However, Global Payments’ quarterly revenues fell from $1.988 billion on 31 December 2019 to $1.918 billion on 30 September 2020. Thus, the actual amount of revenue Global Payments takes in is lower than the estimated growth rate.

What Value Does Global Payments Have?

Global Payments (GPN) offered some value in the form of $44.55 billion in Total Assets on 30 September 2020. The Total Assets grew from $44.48 billion on 31 December 2019.

Similarly to PayPal (PYPL)and Visa (V), Global Payments offers an enormous payments infrastructure. Global Payments claims its platforms process 50 billion transactions in 140 payment types annually.

Global Payments will pay a 19.5₵ quarterly dividend on 26 March 2021. On 10 February 2021, Global Payments offered a forward annualized dividend of 78₵ and a dividend yield of 0.39%.

I think Mr. Market overpriced Global Payments at $203.19 on 10 February 2021. I cannot see anything in Global Payments’ financial numbers that justify that share price.

On the other hand, I think Global Payments has some value and pays a good dividend. I consider Global Payments a FinTech stock investors need to watch but not buy. In my opinion, Global Payments could be a value investment at $100 a share but not at $199.64.