Global Payments (GPN): Share price advances through positive trading channel

Posted Apr 16th 2008 2:06PM by Larry Schutts
Filed under: Earnings Reports, MasterCard Inc'A' (MA), Technical Analysis, Western Union (WU), Stocks to Buy

Global Payments (NYSE: GPN) is a high-volume payments processor of electronic transactions and related money transfers. It performs point-of-sale credit card, debit card, and check authorization functions for merchants and financial institutions and offers corporate and government clients benefits transfer processing and electronic tax payment services. The firm also facilitates money transfers from the US and Europe, primarily targeting immigrants who send funds to their home countries. MasterCard (NYSE: MA) is a client. Western Union (NYSE: WU) is a competitor.

The firm had good news for investors late last month, when it announced fiscal Q3 EPS of 44 cents and revenues of $310.6 million. Wall Street has been expecting 42 cents and $300.9 million. In discussing the solid results, the CEO pointed to successful merchant services operations and strong revenue growth from an Asia-Pacific joint venture with HSBC Holdings (NYSE: HBC). Management also guided FY08 EPS to $1.95-$1.97 ($1.94 consensus) and FY08 revenues to $1.25-$1.26 billion ($1.24B consensus).

The news kept GPN shares cycling through a positive 15-week trading channel. The price is currently consolidating at the base of that channel, where oversold Stochastic and MACD technical parameters suggest the potential for a rise back toward the top. The approximate correspondence of the stock's 50-day moving average to the base of the channel backs the rebound notion.

Brokers recommend the issue with twelve "strong buys," four "buys", seven "holds" and one "underperform." Analysts see a 15% average annual growth rate, through the next five years. The GPN Price to Book ratio (3.03), Price to Free Cash Flow ratio (19.98), Sales Growth rate (19.29%), Operating Margin (19.49%), Net Profit Margin (13.69%), Return on Assets (13.34%) and Return on Investment (15.64%) compare favorably with industry, sector and S&P 500 averages. Institutions hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $35.14 and $48.18. A stop-loss of $35.50 looks good here.

Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold positions in any of the stocks mentioned above.

Tags: fundamental analysis, FundamentalAnalysis, Global Payments, GlobalPayments, GPN, technical analysis, TechnicalAnalysis, trading channel, TradingChannel