Global Payments [NYSE:GPN] May 26, 2009: $33.50
52-week range: $27.48 (Mar. 9, 2009) - $49.87 (Jun. 23, 2008)
Global Payments Inc.* is a payment processing and consumer money transfer company. As a high-volume processor of electronic transactions, the Company enables merchants, multinational corporations, financial institutions, consumers, government agencies and other profit and non-profit business enterprises to facilitate payments to purchase goods and services or further other economic goals. Its role is to serve as an intermediary in the exchange of information and funds that must occur between parties so that a payment transaction or money transfer can be completed. The Company markets its products and services throughout the United States, Canada, Europe and the Asia-Pacific region. It operates in two business segments, merchant services and money transfer, and it offers various products through these segments.
*Company description by MSN MoneyCentral
Fiscal 2009 (ends May 31, 2009) should mark the ninth straight year of record sales and earnings for GPN. The first 9 months showed EPS of $1.76 versus $1.46 year-over-year although slowing economic conditions suggest a few down quarters may be on tap.
As of today, Zacks is looking for FY 2009 and 2010 to come in at $2.20 and $2.34 respectively. That puts GPN’s multiple at 15.3x and 14.3x – well below its historical levels since coming public in 2001.
Here are the per share numbers for continuing operations as reported by Value Line:
FY ……… Sales .…... C/F ……. EPS ….,.. B/V ….. Avg. P/E
2003 …… 6.95 ..…. 1.15 ..... 0.71 .,.… 4.93 …... 20.5x
2004 …… 8.27 …... 1.29 ….. 0.80 ...… 5.90 ……. 26.3x
2005 ……10.03 …….1.80 ..… 1.21 ..…. 7.40 ….… 22.4x
2006 ……11.38 …….2.10 ..… 1.54 …... 9.65 …... 27.6x
2007 …...13.13 …...2.29 …... 1.78 ……11.84 ..… 23.1x
2008 ……16.00 ..….2.55 ….... 1.96 ……14.15 .…. 21.1x
2009 ……19.45 …...3.00 ….… 2.20 ……15.10 .…. 16.4x
• FY 2009 figures include estimates for Q4.
Global’s balance sheet looks healthy. As of February 28th they held over $387 million in cash against total debt of just $194 million. Value Line gives them an ‘A’ for financial strength and an ‘above average’ safety rating. Morningstar awards GPN 4-Stars (out of 5) and figures ‘fair value’ at $41/share.
Management has been very conservative on the dividend front. Global pays a quarterly dividend of two cents for a current yield of just 0.23% and a payout ratio of just 3.6% of trailing earnings.
Global’s name is accurate in depicting its worldwide operations. They derive almost 43% of their revenues from outside the US. Current business locations include Canada, Latin America, Europe and the Asian-Pacific region. China and India are expected to show expanding roles in the company’s future. In June of 2008 Global formed a joint venture with HSBC bank which seems to be contributing to growth.
Global looks to be a nice, steady, growth stock at a lower than normal valuation due to market conditions, rather than company specific issues.
With two or three down quarterly comparisons expected it’s unlikely these shares will run wild to the upside in the near term. The low multiple makes me feel there isn’t a lot of downside either. Here’s my combination play for GPN from now through January 2010…
Buy 1000 GPN @$33.50 ………$33,500
Sell 10 Jan. $35 calls @$3.10 …….……….$3,100
Sell 10 Jan. $35 puts @$4.50 …………….$4,500
Net Cash Out-of-Pocket ……….$25,900
If Global shares move up 4.5% to $35 or higher by expiration date:
The $35 calls will be exercised.
You will sell your shares for $35,000.
The $35 puts will expire worthless.
You will have collected $40 in dividends.
You will have no further option obligations.
You will hold no shares and $35,040 cash for your original
cash outlay of $25,900.
That’s a best-case scenario net profit of $9,140 / $25,900 = 35.2%
on shares that only needed to rise by 4.5% from trade inception.
What’s the risk?
Should GPN stay below $35 through Jan. 16, 2010:
The $35 calls will expire worthless.
The $35 puts will be exercised.
You will be forced to buy an additional 1000 shares and to
lay out another $35,000 cash.
You will have collected $40 in dividends.
You will have no further option obligations.
You will own 2000 shares of GPN.
What’s the break-even on the whole trade?
On the first 1000 shares it’s the $33.50 purchase price less
the $3.10 /share call premium = $30.40 /share.
On the ‘put’ shares it’s the $35 strike price less the
$4.50 /share put premium = $30.50 /share.
Your break-even is the average of
$30.40 + $30.50 = $30.45 /share.
Global Payments shares could drop by $3.10 /share or (-9.25%) without causing a loss on this trade.
Disclosure: Author is long GPN shares and short GPN options.
52-week range: $27.48 (Mar. 9, 2009) - $49.87 (Jun. 23, 2008)
Global Payments Inc.* is a payment processing and consumer money transfer company. As a high-volume processor of electronic transactions, the Company enables merchants, multinational corporations, financial institutions, consumers, government agencies and other profit and non-profit business enterprises to facilitate payments to purchase goods and services or further other economic goals. Its role is to serve as an intermediary in the exchange of information and funds that must occur between parties so that a payment transaction or money transfer can be completed. The Company markets its products and services throughout the United States, Canada, Europe and the Asia-Pacific region. It operates in two business segments, merchant services and money transfer, and it offers various products through these segments.
*Company description by MSN MoneyCentral
Fiscal 2009 (ends May 31, 2009) should mark the ninth straight year of record sales and earnings for GPN. The first 9 months showed EPS of $1.76 versus $1.46 year-over-year although slowing economic conditions suggest a few down quarters may be on tap.
As of today, Zacks is looking for FY 2009 and 2010 to come in at $2.20 and $2.34 respectively. That puts GPN’s multiple at 15.3x and 14.3x – well below its historical levels since coming public in 2001.
Here are the per share numbers for continuing operations as reported by Value Line:
FY ……… Sales .…... C/F ……. EPS ….,.. B/V ….. Avg. P/E
2003 …… 6.95 ..…. 1.15 ..... 0.71 .,.… 4.93 …... 20.5x
2004 …… 8.27 …... 1.29 ….. 0.80 ...… 5.90 ……. 26.3x
2005 ……10.03 …….1.80 ..… 1.21 ..…. 7.40 ….… 22.4x
2006 ……11.38 …….2.10 ..… 1.54 …... 9.65 …... 27.6x
2007 …...13.13 …...2.29 …... 1.78 ……11.84 ..… 23.1x
2008 ……16.00 ..….2.55 ….... 1.96 ……14.15 .…. 21.1x
2009 ……19.45 …...3.00 ….… 2.20 ……15.10 .…. 16.4x
• FY 2009 figures include estimates for Q4.
Global’s balance sheet looks healthy. As of February 28th they held over $387 million in cash against total debt of just $194 million. Value Line gives them an ‘A’ for financial strength and an ‘above average’ safety rating. Morningstar awards GPN 4-Stars (out of 5) and figures ‘fair value’ at $41/share.
Management has been very conservative on the dividend front. Global pays a quarterly dividend of two cents for a current yield of just 0.23% and a payout ratio of just 3.6% of trailing earnings.
Global’s name is accurate in depicting its worldwide operations. They derive almost 43% of their revenues from outside the US. Current business locations include Canada, Latin America, Europe and the Asian-Pacific region. China and India are expected to show expanding roles in the company’s future. In June of 2008 Global formed a joint venture with HSBC bank which seems to be contributing to growth.
Global looks to be a nice, steady, growth stock at a lower than normal valuation due to market conditions, rather than company specific issues.
With two or three down quarterly comparisons expected it’s unlikely these shares will run wild to the upside in the near term. The low multiple makes me feel there isn’t a lot of downside either. Here’s my combination play for GPN from now through January 2010…
Buy 1000 GPN @$33.50 ………$33,500
Sell 10 Jan. $35 calls @$3.10 …….……….$3,100
Sell 10 Jan. $35 puts @$4.50 …………….$4,500
Net Cash Out-of-Pocket ……….$25,900
If Global shares move up 4.5% to $35 or higher by expiration date:
The $35 calls will be exercised.
You will sell your shares for $35,000.
The $35 puts will expire worthless.
You will have collected $40 in dividends.
You will have no further option obligations.
You will hold no shares and $35,040 cash for your original
cash outlay of $25,900.
That’s a best-case scenario net profit of $9,140 / $25,900 = 35.2%
on shares that only needed to rise by 4.5% from trade inception.
What’s the risk?
Should GPN stay below $35 through Jan. 16, 2010:
The $35 calls will expire worthless.
The $35 puts will be exercised.
You will be forced to buy an additional 1000 shares and to
lay out another $35,000 cash.
You will have collected $40 in dividends.
You will have no further option obligations.
You will own 2000 shares of GPN.
What’s the break-even on the whole trade?
On the first 1000 shares it’s the $33.50 purchase price less
the $3.10 /share call premium = $30.40 /share.
On the ‘put’ shares it’s the $35 strike price less the
$4.50 /share put premium = $30.50 /share.
Your break-even is the average of
$30.40 + $30.50 = $30.45 /share.
Global Payments shares could drop by $3.10 /share or (-9.25%) without causing a loss on this trade.
Disclosure: Author is long GPN shares and short GPN options.
