FIS - Embedded Expectations Analysis - 2021 07 20
Fidelity National Information Services (FIS:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) earnings, with a Uniform P/E of 29.1x. At these levels, the market is pricing in bullish expectations for the firm, but management may be concerned about sales growth, the potential of RealNet, and IT spending.Specifically, management may lack confidence in their ability to further execute their geographic expansion strategy, sustain organic growth in their Merchant business, and drive sales growth, particularly in their SaaS-based and e-commerce solution businesses. Furthermore, they may be exaggerating the strength of their business model and the potential of RealNet. They may also lack confidence in their ability to continue to win market share. Finally, management may have concerns about the competitive strength of their platform relative to the market and the sustainability of IT spending growth.
Fidelity National Information Services is a provider of technology solutions for merchants, banks, and capital markets firms globally. The company's solutions include merchant acquiring solutions; payment solutions; global eCommerce solutions; processing and ancillary applications solutions; digital solutions; fraud, risk management and compliance solutions; electronic funds transfer and network services solutions; card and retail payment solutions; wealth and retirement solutions; item processing and output services solutions; securities processing and finance solutions; global trading solutions; asset management and insurance solutions; and corporate liquidity solutions.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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