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Fidelity National's Digital Strategy Aids, Competition a Woe

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Fidelity National Information Services (FIS - Free Report) is benefiting from solid organic growth and continues to undertake initiatives to evolve digital platforms like mobile banking. Also, it remains committed to enhancing shareholder value. However, the company continues to experience intense competition from its peers.

Fidelity National’s shares have gained 12.5% year to date, underperforming the industry’s rally of 19.2%.

Also, the company’s Zacks Consensus Estimate for current-year earnings has been revised slightly upward in the last 30 days. Currently, the stock carries a Zacks Rank #3 (Hold).

The company’s revenue growth story remains impressive as it witnessed a compound annual growth rate of 10.8% in the last five years (ended 2017) on the back of its strong market position and broad customer base. Though the increasing trend reversed in the first half of 2018, the company’s several ongoing initiatives, including digital strategy, will support its revenues base. Further, Fidelity National expects organic revenues to grow 2.5-3.5% in 2018.

Also, the company’s investments in mobile banking and innovative products such as PayNet and BuyWay are expected to offer significant growth opportunities for the long term.

Further, Fidelity National has a $4 billion share repurchase program underway, to be completed by December 2020, with about $3.3 billion remaining outstanding as of Jun 30, 2018. Also, in February 2018, the company announced a 10% hike in quarterly dividend. Moreover, its debt/equity ratio compares favorably with the industry’s average, which indicates that these capital deployment activities are sustainable.

However, the company is exposed to significant competition from the new entrants along with the existing, well-experienced peers that seek to leverage on shifts in technology or product innovation to attract customers.

Stocks to Consider

Some top-ranked stocks in the same space are Total System Services (TSS - Free Report) , Green Dot Corporation (GDOT - Free Report) and WEX, Inc. (WEX - Free Report) . 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.

Total System Services’Zacks Consensus Estimate for earnings has been revised nearly 1.2% upward for 2018, in the last 30 days. Also, its share price has increased 46.8% in the past 12 months.

Green Dot’s earnings estimates for the current year have been revised slightly upward, over the last 60 days. Further, the company’s shares have jumped 75.7% in a year.

WEX’s consensus estimate for current-year earnings has been revised slightly upward, over the last 30 days. Moreover, in the past year, its shares have gained 83.9%.

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