Valens Equity Weekly Insights - 2024 02 13
Fidelity National Information Services (FIS) bit off more than it could chew with its WorldPay acquisition. Management has since recognized that and has taken steps to get back to its core business while focusing on growing and improving efficiency. Uniform Accounting highlights that the market is missing that FIS is already starting to execute, indicating equity upside.FIS is one of the giants in the payment processing industry. It specializes in working with the banks, and its WorldPay acquisition helped it get more exposure to merchants. Now that it's spinning off WorldPay, management has started focusing on growing in the banking side of the payments industry, and it's taking steps to make its existing business more efficient. This should help it keep its Uniform ROA consistently above 50% as it has been for years, and yet, the market is pricing its growth and returns to fade to their lowest levels in years.
FIS management is closely aligned to focus on metrics that will incentivize revenue growth, and improved efficiency which should drive profitability and growth higher than the market expects.
Management's confidence about its progress in separating from Worldpay and its focus on growing its internal business point to sustained fundamental momentum going forward.
FIS
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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