FISV - Embedded Expectations Analysis - 2020 05 26
Fiserv, Inc. (FISV:USA) currently trades near corporate averages relative to UAFRS-based (Uniform) earnings, with a 23.4x Uniform P/E. At these levels, markets are pricing in bearish expectations for the firm. However, given management's confidence about business resiliency, call center initiatives, and their merchant business, market expectations are overly bearish, suggesting outperformance remains warranted for FISV going forwardSpecifically, management is confident they are working to enhance the business to lead the industry regardless of the macro environment, that the business is highly resilient to economic downturns, and that April results outperformed their expectations. In addition, they are confident that scale is important in the merchant business and that they expect economic recovery to be stair-stepped. Moreover, they are confident they have had success extending the call center operations of First Data through enhanced self-service capabilities, that these initiatives will deliver revenue synergies, and that they are focused on allocating capital to benefit shareholders
Fiserv is a provider of financial services technology. The company provides account processing systems, electronic payments processing products and services, internet and mobile banking systems, and related services. The company's segments are: First Data, which provides merchant acquiring, e-commerce, mobile commerce, and other business solutions; Payments and Industry Products, which provides electronic bill payment and presentment services, internet and mobile banking software; and Financial Institution Services, which provides financial institutions with account processing services, item processing and source capture services, loan origination and servicing products, and cash management, among others.
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
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