A prudent investment decision involves buying stocks that have solid prospects and selling those that carry risks. At times, it is rational to hold certain stocks that have enough potential but are weighed down by tough market conditions.
Here we discuss about First Data Corporation (FDC - Free Report) , a stock with an expected long-term earnings per share growth rate of 11%. In a years’ time, the stock has rallied 17%, outperforming the 8.4% increase of the industry it belongs to.
We believe First Datahas the potential to exceed expectations moving ahead. The reasons behind our optimism include the company’s benefits from acquisitions, partnerships and agreements.
Let’s discuss them in detail.
Active on Acquisition Front
Acquisition of BluePay, Acculynk and CardConnect are significant additions to the First Data’s product portfolio. BluePay will allow the company to expand market share in the high growth integrated payments space. Acculynk acquisition is expected to boost First Data’s extensive payments portfolio. CardConnect was the company’s peer payment processor and its long-time distribution partner. Its acquisition will help First Data to enhance its financial technology capacities.
Moreover, the addition of CardConnect’s invoice-to-cash processing capabilities opens vast opportunities for First Data in the ERP space and helps it better manage cash and other services for clients. First Data can now better focus on globalizing its offerings and strategic partnerships along with boosting its business around enterprise clients.
First Data Corporation Net Income (TTM)
Strategic Partnerships and Agreements
Strategic partnerships and agreements have been playing a significant role in shaping the growth trajectory of the company. In first-quarter 2018, First Data teamed up with RBL Bank. The partnership will allow RBL Bank to leverage First Data’s VisionPLUS for its credit card customers across India. Earlier this year, the company announced a similar kind of partnership with SBI Card, a leading credit card issuer in India. The move enables SBI Card to leverage VisionPLUS to enhance service offerings. These endeavors have improved First Data’s client base and are likely to boost top-line growth.
Additionally, Global Financial Solutions (GFS) segment will continue to expand globally, courtesy of these partnerships and renewed agreements with Credit One and PSCU. First Data also extended partnership with Alibaba’s (BABA) Alipay, which enables the company to integrate Alipay at its point-of-sale (POS) across 35,000 North American merchants. Moving ahead, First Data’ Global Business Solutions (GBS) segment is likely to gain momentum.
Although First Data rides high on significant growth prospects, it is not free from overhangs. The company’s all three business segments experience seasonality with stronger demand in the fourth quarter and weaker demand in the first quarter, relative to the second and third quarters. Seasonality causes considerable fluctuations in revenues and profits, and makes forecasting difficult. Also, frequent acquisitions have escalated integration risks. Nevertheless, we believe that acquisitions, partnerships and agreements bode well for the company in the long term.
First Data carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Some better-ranked stocks in the broader Business Services sector are Convergys Corporation (CVG - Free Report) , Broadridge Financial Solutions Inc. (BR - Free Report) and NV5 Global (NVEE - Free Report) , each carrying a Zacks Rank #2 (Buy).
The long-term expected earnings per share growth rate for Convergys Corporation, Automatic Data Processing and Broadridge is 9%, 10% and 20%, respectively.
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