On Dec 19, shares of Total System Services, Inc. (TSS - Free Report) touched a new 52-week high of $80.23. Notably, the stock closed the day a bit lower at $79.67, up 0.8% from the preceding day’s closing.
What Investors Cheer For
The company has recently inked a deal valued at nearly $1.05 billion with Parthenon Capital Partners to acquire payment technology company, Cayan, in an all-cash transaction. This strategic move has impressed investors.
The buyout would complement Total System’s merchant goals to deliver a premium quality of services and solutions. The transaction would further strengthen its huge scale and distribution capabilities.
The deal accelerates the company’s position as a leading technology payments provider to small and medium size businesses in the United States.
Also last week, the company extended its long-term agreement with Capital One Financial Corp. (COF - Free Report) to continue providing processing services for the company’s North American portfolio of consumer and commercial credit card accounts for multiple years.
Can the Momentum Continue?
We believe the company to retain its revenue momentum in the coming quarters on the back of a strong market position as well as attractive core business that continue to be driven by new deals, renewed agreements, accretive acquisitions and expansion of service offerings. These will further fuel a strong contribution to the company’s segments comprising Issuer Solutions, Merchant Services and NetSpend.
The company increased its expectation for total revenues of 2017 to the band of $4.839-$4.889 billion, reflecting year-over-year growth of 16-17% from the past guidance of $4.80-$4.89 billion.
The company has a strong track of cash flows, enabling capital deployment for acquisition, debt repayment and dividend payment.
Recently, the company completed its deleveraging commitments and resumed share buyback activity which should support the stock.
Further, Total System stock seems undervalued based on its Price/Earnings (P/E) ratio. The company is currently trading at a forward 12-month price-to-earnings ratio of 24.9, which although lies near the upper end of its five-year trading range of 15.2-25.2 and compares unfavorably with the industry P/E ratio of 27.9.
The above-mentioned factors suggest that this Zacks Rank #2 (Buy) stock has further upside potential. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Additionally, Total System’s shares have surged 59% in a year, outdoing the 37% rally of the industry it belongs to.
Other Stocks to Consider
Investors interested in the Payments space can also consider other top-ranked stocks like Western Union Company (WU - Free Report) and Visa Inc (V - Free Report) , both carrying the same bullish Zacks Rank as Total System.
Western Union delivered positive surprises in three of the last four quarters with an average beat of 9.1%.
Visa came up with positive surprises in each of the last four quarters with an average beat of 8.1%.
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