Total System Services shares defining flag

Total System Services Inc. (NYSE:TSS) provides electronic payment processing in North America, Europe and the Asia Pacific region. Related offerings include credit authorization, account management, call-center operations and fraud monitoring. Total System Services is more than 80-percent owned by Synovus Financial Corp. (NYSE:SNV) and accounts for about one-third of that firm's total revenue.

The company had good news for investors last week, when it reported Q4 EPS of 44 cents and revenues of $503.9 million. Analysts had been expecting 24 cents and $434.8 million. Management also guided FY07 revenues to $1.69-$1.73 billion ($1.71B consensus) and said it expects 2007 net income to rise by 14-17% (8-10% prior guidance). Shares popped on the news and are now consolidating the gain in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling when they entered them. In this case, that would be to the upside.

Brokers recommend the stock with one "buy", thirteen "holds" and one "sell." The TSS P/E ratio (23.42), PEG ratio (1.80), Price to Sales ratio (3.26), Price to Cash Flow ratio (13.54), Price to Free Cash Flow ratio (20.67), EPS Growth rate (76.00%), Operating Margin (19.98%), Net Profit Margin (13.75%), Return on Assets (16.08%), Return on Investment (19.88%) and Return on Equity (22.35%) compare favorably with industry, sector and S&P 500 averages.

Institutional investors hold about eight percent of the outstanding shares. Over the past fifty-two weeks, TSS has traded between $17.87 and $30.75. A stop-loss of $25.60 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com.