FIS - Embedded Expectations Analysis - 2021 10 29
Fidelity National Information Services, Inc. (FIS) currently trades near corporate and above historical averages relative to Uniform earnings, with a 24.2x Uniform P/E (Fwd. V/E').At these levels, markets are pricing in expectations for Uniform ROA to remain near current levels, accompanied by 5% Uniform asset growth.
Meanwhile, if sustained in perpetuity, analyst expectations for 65% Uniform ROA and 16% Uniform asset growth imply a stock price of $198, representing approximately 63% equity upside for the firm.
However, analyst expectations for near-term asset growth exceeds average levels and may not be sustainable moving forward.
Moreover, the firm's most recent earnings call suggests management may have concerns about their merchant services revenue growth and margins.
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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