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Miss Out on Visa or Mastercard? Watch FleetCor Technologies
Posted by: Jae Jun (IP Logged)
Date: April 18, 2013 11:43AM
Quick Synopsis: FleetCor is a company with a strong moat in an attractive industry and performing well for shareholders.
The company has more room for growth but some questions have to be asked as to whether this will make it a good investment.
What Is FleetCor Technologies?
Having missed out on Visa (V) and Mastercard (MA), stumbling upon FleetCor (FLT) is a pleasant surprise.
FleetCor Technologies is a company that provides fuel cards and payment products used by employees. They also have lodging cards, but since the overall concept is the same, I will focus most of the discussion on fuel cards.
The important thing to understand is that although I've included Visa and Mastercard into the conversation, fuel cards and credit cards are different in many ways.
First, what is a fuel card?
Differences Between Credit Cards and Fuel CardsA fuel card, as the name suggests, is mainly used for fuel.
Companies that require lots of travel in their line of work gain a lot of benefits with issuing fuel cards to their employees instead of standard credit cards.
Here are the pros and cons taken from wikipedia.
FleetCor's Business Model Is a Competitive AdvantageFleetCor has been around since 2000 and has grown mainly from acquiring smaller fleet card companies around the world.
The company does business in over 18 countries and has such an extensive network of where its cards are accepted that it would literally take a decade to replicate anything in the same size and scale.
There is also switching cost involved in such a network. Once you have gas stations equipped with hardware and software to work for these type of fuel cards, it's very difficult to switch.
It's different from just accepting credit cards and performing transactions.
Based on the data that fuel cards track, the data provided to the system from every gas pump is much more than the average credit card transaction.
This Is a Very Profitable BusinessVisa and Mastercard are very profitable businesses. They receive a percentage in fees for every swipe.
Since I sell stock valuation tools at www.oldschoolvalue.com, I have to accept credit cards. So, I understand how powerful this industry is in terms of profitability.
The fee per swipe racks up, and I understand why little mom-and-pop shops don't like to take Amex cards or why they make you spend at least $10 before you can use a credit card.
Actual numbers showing profitability can be seen below.
High Insider Ownership Is a Good Sign
The CEO holds a 5.5% stake the currently $6 billion company which is more than $300 million.Two members of the board are also part of Summit Partners which owns 28% of the company.
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