In this article, let's take a look at Fiserv, Inc. (FISV, Financial), a $16.85 billion market cap company that is a leading provider of technology to financial services companies.
Revenues and EPS
Looking at profitability, revenues grew by 5.16% and led earnings per share increased in the most recent quarter compared to the same quarter a year ago ($0.95 vs $0.61). During the past fiscal year, the company increased its bottom line. It earned $2.45 versus $2.15 in the previous year. This year, Wall Street expects an improvement in earnings ($3.37 versus $2.45).
Net income
The net income increased by 50.3% when compared to the same quarter one year prior (from $159.00 million to $239.00 million).
Margins
The gross profit margin is considered very high, at 52.18%. It has increased from the same quarter the previous year. The net margin is at 15.84% which is ranked higher than 91% of the 969 companies in the Business Services industry.
Profitability
Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
| Ticker | Company | ROE (%) |
| FISV | Fiserv | 22.78 |
| MA | MasterCard Inc | 49.88 |
| ADP | Automatic Data Processing | 23.48 |
| V | Visa Inc. | 20.01 |
| CSC | Computer Sciences Corp | 16.47 |
| Â | Industry Median | 8.95 |
The company has a current ROE of 22.78% which is higher than the industry median and the one exhibit by Visa (V, Financial) and Computer Sciences Corp (CSC, Financial).In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. So for investors looking those levels or more, Automatic Data Processing (ADP, Financial) and MasterCard Inc (MA, Financial) could be the options. It is very important to understand this metric before investing, and it is important to look at the trend in ROE over time.
Relative Valuation
In terms of valuation, the stock sells at a trailing P/E of 22.3x, trading at a discount compared to an average of 32.8x for the industry. To use another metric, its price-to-book ratio of 4.9x indicates a premium versus the industry average of 3.26x while the price-to-sales ratio of 3.5x is above the industry average of 1.67x.
As we can see in the next chart, the stock price has an upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $30,319, which represents a 24.9% compound annual growth rate (CAGR).
Final comment
The company has a good ROE, as well a good valuation levels. We saw strengths on earning´s growth, good profit margins and increase in stock price during the past year. This analysis make me feel bullish on this stock.
Hedge fund guru Ray Dalio (Trades, Portfolio) added this stock to his portfolios in the third quarter of 2014.
Disclosure: Omar Venerio holds no position in any stocks mentioned
