On Jun 5, we issued an updated research report on Fidelity National Information Services, Inc. FIS. The company is benefiting from solid organic growth and evolving digital platform like mobile banking. However, intense competition and high debt level keep us apprehensive.
Fidelity National’s shares have gained 14.4% over the last six months, underperforming the Zacks categorized Financial Transaction Services industry’s rally of 16.9%.
Also, the company’s earnings estimates for 2017 and 2018 have been revised slightly downward in the last 30 days. As a result, the stock currently carries a Zacks Rank #3 (Hold).
The company has witnessed an impressive compound annual growth rate of 12.4% in the last five years (ended 2016) on the back of its strong market position and broad customer base. Also, its initiatives such as digitization encourage us. Further, Fidelity National expects organic revenues to grow 2–3% in 2017.
Fidelity National began the year by increasing common stock dividend by 12%, boosting shareholders’ confidence in the stock. Also, the company witnesses strong cash flows.
However, the company’s balance sheet seems leveraged. Despite its efforts to reduce the debt level, Fidelity National had outstanding debt of about $9.5 billion as of Mar 31, 2017. This is likely to restrict the company’s future expansion plans and mar profitability.
Moreover, the company is exposed to significant competition from the new entrants along with the existing, well-experienced peers.
Stocks to Consider
Some better-ranked stocks in the same space include Vantiv, Inc. VNTV, Total System Services, Inc. and Visa Inc. V. All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Vantiv witnessed an upward earnings estimate revision of 1.5%, over the past 30 days. Also, its shares have gained 4.0% so far this year.
Total System Services’ earnings estimates moved upward by 4.4% over the past 60 days, for the current year. Its share price has increased 21.0%, year to date.
Visa’s current-year earnings estimates were revised nearly 1% upward, over the past 60 days. Year to date, its share price has rallied 23.8%.
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