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Here's Why You Should Retain Fiserv Stock in Your Portfolio for Now
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Fiserv, Inc. (FI - Free Report) stock has had an impressive run in the year-to-date period. Shares of the company have gained 54.2% compared with 23.5% growth of the industry it belongs to and the 30.3% rise in the Zacks S&P 500 Composite.
YTD Price Performance
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The company’s revenues are anticipated to increase 6.3% and 8.8% year over year in 2024 and 2025, respectively. Earnings are estimated to rise 16.6% in 2024 and 16.3% in 2025. The company has an estimated long-term (three to five years) earnings per share growth rate of 14.9%.
Factors That Auger Well for FI’s Success
Clover is the company’s primary growth driver, and its revenues rose 28% year over year in the third quarter of 2024. In 2023, management anticipated $4.5 billion in Clover revenues by 2026, translating into a 28.5% annual growth rate. Clover is increasing volumes and reported a gross payment volume surged to an annualized $274 billion, rising 19% year over year. Fiserv's performance is improving on the back of Clover’s rising volumes and growing ancillary revenues.
Fiserv’s business model combines recurring revenues and high incremental margins of a scaled processing business with higher growth and margins. Moreover, it remains consistent with providing cloud-based software and service offerings. Therefore, we expect adjusted revenues to rise 6.9%, 8.1% and 7.5% in 2024, 2025 and 2026, respectively.
Fiserv's current ratio (a measure of liquidity) at the end of third-quarter 2024 was pegged at 1.07, higher than 1.06 in the preceding quarter. The rise in the current ratio is due to a 72.8% decline in settlement obligations, which represents the amounts payable to merchants and payees. A current ratio of more than 1 indicates that the company will pay off short-term obligations efficiently.
Fiserv has been consistent with share repurchases. In 2023, 2022, and 2021, Fiserv repurchased 40 million, 25.4 million and 23.3 million shares for $4.7 billion, $2.50 billion and $2.57 billion, respectively. Such moves instill investors’ confidence and positively impact the bottom line.
Risks Faced by Fiserv
FI’s core banking products and services face fierce competition. The industry is becoming more competitive with the entry of numerous non-banking bodies, such as internal data processing departments, data processing affiliates of large companies, large computer hardware manufacturers, independent computer service firms and processing centers. Hence, maintaining strong and long-term client relationships is a hefty task amid stiff competition.
Integration risks rise due to FI’s policy of acquiring multiple companies. Buyouts can impact its balance sheet in the form of high goodwill and intangible assets. Furthermore, rapid acquisitions distract management, which could affect organic growth.
AppLovin has a long-term earnings growth expectation of 20%. APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.
Climb Global Solutions has a long-term earnings growth expectation of 16%. CLMB delivered a trailing four-quarter earnings surprise of 51.1%, on average.
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Here's Why You Should Retain Fiserv Stock in Your Portfolio for Now
Fiserv, Inc. (FI - Free Report) stock has had an impressive run in the year-to-date period. Shares of the company have gained 54.2% compared with 23.5% growth of the industry it belongs to and the 30.3% rise in the Zacks S&P 500 Composite.
YTD Price Performance
The company’s revenues are anticipated to increase 6.3% and 8.8% year over year in 2024 and 2025, respectively. Earnings are estimated to rise 16.6% in 2024 and 16.3% in 2025. The company has an estimated long-term (three to five years) earnings per share growth rate of 14.9%.
Factors That Auger Well for FI’s Success
Clover is the company’s primary growth driver, and its revenues rose 28% year over year in the third quarter of 2024. In 2023, management anticipated $4.5 billion in Clover revenues by 2026, translating into a 28.5% annual growth rate. Clover is increasing volumes and reported a gross payment volume surged to an annualized $274 billion, rising 19% year over year. Fiserv's performance is improving on the back of Clover’s rising volumes and growing ancillary revenues.
Fiserv’s business model combines recurring revenues and high incremental margins of a scaled processing business with higher growth and margins. Moreover, it remains consistent with providing cloud-based software and service offerings. Therefore, we expect adjusted revenues to rise 6.9%, 8.1% and 7.5% in 2024, 2025 and 2026, respectively.
Fiserv's current ratio (a measure of liquidity) at the end of third-quarter 2024 was pegged at 1.07, higher than 1.06 in the preceding quarter. The rise in the current ratio is due to a 72.8% decline in settlement obligations, which represents the amounts payable to merchants and payees. A current ratio of more than 1 indicates that the company will pay off short-term obligations efficiently.
Fiserv has been consistent with share repurchases. In 2023, 2022, and 2021, Fiserv repurchased 40 million, 25.4 million and 23.3 million shares for $4.7 billion, $2.50 billion and $2.57 billion, respectively. Such moves instill investors’ confidence and positively impact the bottom line.
Risks Faced by Fiserv
FI’s core banking products and services face fierce competition. The industry is becoming more competitive with the entry of numerous non-banking bodies, such as internal data processing departments, data processing affiliates of large companies, large computer hardware manufacturers, independent computer service firms and processing centers. Hence, maintaining strong and long-term client relationships is a hefty task amid stiff competition.
Integration risks rise due to FI’s policy of acquiring multiple companies. Buyouts can impact its balance sheet in the form of high goodwill and intangible assets. Furthermore, rapid acquisitions distract management, which could affect organic growth.
FI’s Zacks Rank & Stocks to Consider
Fiserv carries a Zacks Rank #3 (Hold) at present.
Some better-ranked stocks from the broader Zacks Business Services sector are AppLovin (APP - Free Report) and Climb Global Solutions, Inc. (CLMB - Free Report) , each carrying a Zacks Rank of 2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
AppLovin has a long-term earnings growth expectation of 20%. APP delivered a trailing four-quarter earnings surprise of 26.2%, on average.
Climb Global Solutions has a long-term earnings growth expectation of 16%. CLMB delivered a trailing four-quarter earnings surprise of 51.1%, on average.