Total System Services, Inc. (TSS - Free Report) has been witnessing upward revisions over the last 60 days. The Zacks Consensus Estimate for 2017 and 2018 moved north by 1.5% and 2.3%, respectively.
In fact, the company surpassed estimates in each of the last four quarters, with an average positive earnings surprise of 3.5%.
The stock presently carries a Zacks Rank #2 (Buy) with an impressive Growth Score of B. Back-tested results show that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, handily outperform others.
Its share price performance also remains impressive. Shares of Total System have gained 36.7% in a year, outperforming the industry’s growth of 22.2% as well as the S&P 500’s 12.9% gain.
Why Total System Is an Attractive Pick
Increase in Earnings Guidance: Following second-quarter results, the company raised its full-year revenue and earnings per share guidance for the second time this year. It now expects total revenues of $4.80 billion to $4.89 billion, reflecting an increase of 15% to 17% over 2016 and adjusted EPS of $3.22 to $3.30, reflecting 15% to 18% growth year over year. A strong guidance instills investors' confidence in the company.
Consistent Top-Line Growth: Total System has witnessed robust growth in revenues since 2010 (except in 2012 when revenues declined a meager 0.9%). The improvement continued through the first half of 2017. A number of profitable acquisitions along with consistent focus on new product initiatives, technology modernization and product diversification have added to its top-line growth. The company’s recent guidance also points toward top-line growth, cementing our confidence in the stock.
Bottom Line Growing at Double Digits: Total System’s earnings per share has grown at impressive double-digit rates since 2011. This has been achieved on the back of its expense management along with share buybacks. A strong guidance for 2017 is being viewed favorably by investors.
Financial Strength: The company has a strong track of cash flow. For 2017, the company expects free cash flow in the $600 million to $630 million range, up from the previous guidance of $580-$610 million. It also remains committed to enhance shareholders’ value through share buybacks and dividend payouts. The company’s strong free cash flow and deleveraging progress supported a 30% increase in its quarterly dividend in July 2017.
Stock Undervalued: Total System’s valuation looks attractive at the current level. The company is currently trading at a one-year forward P/E ratio of 22, which is lower than 25.7 for the industry.
Some other top-ranked players in the same space are Green Dot Corp. (GDOT - Free Report) , Vantiv, Inc. (VNTV - Free Report) and Western Union Co. (WU - Free Report) . While Green Dot sports a Zacks Rank #1, the other two carry the same Zacks Rank as Visa. You can see the complete list of today’s Zacks #1 Rank stocks here.
Green Dot has been witnessing upward estimate revisions for the last 30 days. In a year’s time, the company’s share price has risen more than 99%.
Vantiv has been witnessing upward estimate revisions for the last 30 days. Further, the stock has surged nearly 35.1% in the last 12 months.
Western Union has seen upward estimate revisions for the last 30 days. It beat estimates in two of the last four quarters, with an average positive surprise of 4%.
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