Intrinsic value of Global Payments Inc. - GPN

Previous Close

$157.75

  Intrinsic Value

$57.24

stock screener

  Rating & Target

str. sell

-64%

Previous close

$157.75

 
Intrinsic value

$57.24

 
Up/down potential

-64%

 
Rating

str. sell

We calculate the intrinsic value of GPN stock by summing up the current values of future distributable cash flows generated by the company and dividing the sum by the number of outstanding shares. As such, the intrinsic value calculation depends entirely on projections. The more accurate your projections of the company's performance are - the more reliable is the intrinsic value calculation result. Please make sure to check the stock valuation input data below and adjust it if necessary. The quality of the output (intrinsic valuation result) is only as good as the quality of the input. See also DISCLAIMERS.

STOCK VALUATION INPUT DATA

Revenue (in 0001), $M
Initial revenue growth rate, %
Terminal revenue growth rate, %
Revenue decline factor
Initial discount rate, %
Discount rate multiplier
Variable cost ratio, %
Fixed operating expenses, $M
Interest rate on debt, %
Effective corporate tax rate, %
Production assets / Revenue, %
Life of production assets, yrs
Working capital / Revenue, %
Revenue / Adjusted assets
Adjusted equity ratio
Cash flow adjustment, % of Revenue
Book value of equity, $M
Shares outstanding, mln
Market capitalization, $bln 24.9

 

FINANCIAL STATEMENTS FORECAST and PRESENT VALUE CALCULATION

Fiscal year
   2
   3
   4
   5
   6
   7
   8
   9
   10
   11
   12
   13
   14
   15
   16
   17
   18
   19
   20
   21
   22
   23
   24
   25
   26
   27
   28
   29
   30
   31

INCOME STATEMENT

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue growth rate, %
  2.00
  2.30
  2.57
  2.81
  3.03
  3.23
  3.41
  3.57
  3.71
  3.84
  3.95
  4.06
  4.15
  4.24
  4.31
  4.38
  4.44
  4.50
  4.55
  4.59
  4.64
  4.67
  4.70
  4.73
  4.76
  4.78
  4.81
  4.83
  4.84
  4.86
Revenue, $m
  3,433
  3,512
  3,603
  3,704
  3,816
  3,939
  4,074
  4,219
  4,375
  4,543
  4,723
  4,914
  5,119
  5,335
  5,566
  5,809
  6,068
  6,341
  6,629
  6,934
  7,255
  7,594
  7,951
  8,328
  8,724
  9,142
  9,581
  10,043
  10,530
  11,041
Variable operating expenses, $m
  2,932
  2,979
  3,033
  3,093
  3,160
  3,234
  3,314
  3,400
  3,494
  3,594
  2,818
  2,932
  3,054
  3,183
  3,321
  3,466
  3,620
  3,783
  3,955
  4,137
  4,329
  4,531
  4,744
  4,969
  5,206
  5,455
  5,717
  5,993
  6,283
  6,588
Fixed operating expenses, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total operating expenses, $m
  2,932
  2,979
  3,033
  3,093
  3,160
  3,234
  3,314
  3,400
  3,494
  3,594
  2,818
  2,932
  3,054
  3,183
  3,321
  3,466
  3,620
  3,783
  3,955
  4,137
  4,329
  4,531
  4,744
  4,969
  5,206
  5,455
  5,717
  5,993
  6,283
  6,588
Operating income, $m
  502
  534
  570
  611
  656
  706
  760
  819
  882
  949
  1,905
  1,982
  2,064
  2,152
  2,245
  2,343
  2,447
  2,557
  2,674
  2,797
  2,926
  3,063
  3,207
  3,359
  3,519
  3,687
  3,864
  4,051
  4,247
  4,453
EBITDA, $m
  1,669
  1,708
  1,752
  1,801
  1,856
  1,915
  1,981
  2,051
  2,127
  2,209
  2,296
  2,390
  2,489
  2,594
  2,706
  2,825
  2,950
  3,083
  3,223
  3,371
  3,528
  3,693
  3,866
  4,049
  4,242
  4,445
  4,659
  4,883
  5,120
  5,369
Interest expense (income), $m
  94
  315
  325
  337
  351
  366
  382
  401
  420
  442
  465
  490
  517
  545
  575
  608
  642
  678
  716
  757
  800
  845
  893
  943
  996
  1,052
  1,111
  1,173
  1,238
  1,306
  1,378
Earnings before tax, $m
  187
  208
  233
  260
  291
  324
  359
  398
  440
  484
  1,415
  1,465
  1,519
  1,576
  1,637
  1,701
  1,769
  1,841
  1,917
  1,997
  2,081
  2,170
  2,264
  2,363
  2,467
  2,577
  2,692
  2,813
  2,941
  3,075
Tax expense, $m
  50
  56
  63
  70
  78
  87
  97
  107
  119
  131
  382
  396
  410
  426
  442
  459
  478
  497
  518
  539
  562
  586
  611
  638
  666
  696
  727
  760
  794
  830
Net income, $m
  136
  152
  170
  190
  212
  236
  262
  291
  321
  353
  1,033
  1,070
  1,109
  1,151
  1,195
  1,242
  1,292
  1,344
  1,399
  1,458
  1,519
  1,584
  1,653
  1,725
  1,801
  1,881
  1,965
  2,054
  2,147
  2,245

BALANCE SHEET

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash and short-term investments, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Total assets, $m
  13,517
  13,828
  14,183
  14,582
  15,024
  15,509
  16,038
  16,609
  17,225
  17,886
  18,594
  19,348
  20,152
  21,006
  21,912
  22,872
  23,888
  24,963
  26,099
  27,298
  28,564
  29,898
  31,305
  32,787
  34,348
  35,991
  37,721
  39,541
  41,456
  43,470
Adjusted assets (=assets-cash), $m
  13,517
  13,828
  14,183
  14,582
  15,024
  15,509
  16,038
  16,609
  17,225
  17,886
  18,594
  19,348
  20,152
  21,006
  21,912
  22,872
  23,888
  24,963
  26,099
  27,298
  28,564
  29,898
  31,305
  32,787
  34,348
  35,991
  37,721
  39,541
  41,456
  43,470
Revenue / Adjusted assets
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
  0.254
Average production assets, $m
  4,896
  5,009
  5,137
  5,282
  5,442
  5,618
  5,809
  6,016
  6,239
  6,479
  6,735
  7,008
  7,299
  7,608
  7,937
  8,284
  8,653
  9,042
  9,453
  9,888
  10,346
  10,829
  11,339
  11,875
  12,441
  13,036
  13,663
  14,322
  15,016
  15,745
Working capital, $m
  -292
  -299
  -306
  -315
  -324
  -335
  -346
  -359
  -372
  -386
  -401
  -418
  -435
  -454
  -473
  -494
  -516
  -539
  -563
  -589
  -617
  -646
  -676
  -708
  -742
  -777
  -814
  -854
  -895
  -939
Total debt, $m
  6,026
  6,243
  6,491
  6,770
  7,078
  7,417
  7,786
  8,185
  8,615
  9,076
  9,570
  10,096
  10,657
  11,253
  11,886
  12,556
  13,266
  14,016
  14,809
  15,646
  16,529
  17,460
  18,442
  19,476
  20,566
  21,713
  22,920
  24,191
  25,528
  26,934
Total liabilities, $m
  9,435
  9,652
  9,900
  10,178
  10,487
  10,826
  11,194
  11,593
  12,023
  12,485
  12,978
  13,505
  14,066
  14,662
  15,294
  15,965
  16,674
  17,424
  18,217
  19,054
  19,937
  20,869
  21,851
  22,885
  23,975
  25,122
  26,329
  27,600
  28,936
  30,342
Total equity, $m
  4,082
  4,176
  4,283
  4,404
  4,537
  4,684
  4,843
  5,016
  5,202
  5,402
  5,615
  5,843
  6,086
  6,344
  6,617
  6,907
  7,214
  7,539
  7,882
  8,244
  8,626
  9,029
  9,454
  9,902
  10,373
  10,869
  11,392
  11,941
  12,520
  13,128
Total liabilities and equity, $m
  13,517
  13,828
  14,183
  14,582
  15,024
  15,510
  16,037
  16,609
  17,225
  17,887
  18,593
  19,348
  20,152
  21,006
  21,911
  22,872
  23,888
  24,963
  26,099
  27,298
  28,563
  29,898
  31,305
  32,787
  34,348
  35,991
  37,721
  39,541
  41,456
  43,470
Debt-to-equity ratio
  1.480
  1.500
  1.520
  1.540
  1.560
  1.580
  1.610
  1.630
  1.660
  1.680
  1.700
  1.730
  1.750
  1.770
  1.800
  1.820
  1.840
  1.860
  1.880
  1.900
  1.920
  1.930
  1.950
  1.970
  1.980
  2.000
  2.010
  2.030
  2.040
  2.050
Adjusted equity ratio
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302
  0.302

CASH FLOW

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income, $m
  136
  152
  170
  190
  212
  236
  262
  291
  321
  353
  1,033
  1,070
  1,109
  1,151
  1,195
  1,242
  1,292
  1,344
  1,399
  1,458
  1,519
  1,584
  1,653
  1,725
  1,801
  1,881
  1,965
  2,054
  2,147
  2,245
Depreciation, amort., depletion, $m
  1,168
  1,174
  1,182
  1,190
  1,199
  1,210
  1,221
  1,233
  1,246
  1,260
  392
  407
  424
  442
  461
  482
  503
  526
  550
  575
  602
  630
  659
  690
  723
  758
  794
  833
  873
  915
Funds from operations, $m
  1,304
  1,326
  1,352
  1,380
  1,412
  1,446
  1,483
  1,523
  1,567
  1,613
  1,424
  1,477
  1,533
  1,593
  1,656
  1,724
  1,795
  1,870
  1,949
  2,033
  2,121
  2,214
  2,312
  2,415
  2,524
  2,639
  2,759
  2,886
  3,020
  3,160
Change in working capital, $m
  -6
  -7
  -8
  -9
  -10
  -10
  -11
  -12
  -13
  -14
  -15
  -16
  -17
  -18
  -20
  -21
  -22
  -23
  -25
  -26
  -27
  -29
  -30
  -32
  -34
  -35
  -37
  -39
  -41
  -43
Cash from operations, $m
  1,310
  1,333
  1,359
  1,389
  1,421
  1,456
  1,495
  1,536
  1,580
  1,627
  1,440
  1,493
  1,551
  1,612
  1,676
  1,744
  1,817
  1,893
  1,973
  2,059
  2,148
  2,243
  2,342
  2,447
  2,558
  2,674
  2,797
  2,926
  3,061
  3,204
Maintenance CAPEX, $m
  -279
  -285
  -291
  -299
  -307
  -316
  -327
  -338
  -350
  -363
  -377
  -392
  -407
  -424
  -442
  -461
  -482
  -503
  -526
  -550
  -575
  -602
  -630
  -659
  -690
  -723
  -758
  -794
  -833
  -873
New CAPEX, $m
  -96
  -113
  -129
  -145
  -160
  -176
  -191
  -207
  -223
  -239
  -256
  -273
  -291
  -309
  -328
  -348
  -368
  -389
  -411
  -434
  -458
  -483
  -509
  -537
  -565
  -595
  -627
  -659
  -694
  -730
Cash from investing activities, $m
  -375
  -398
  -420
  -444
  -467
  -492
  -518
  -545
  -573
  -602
  -633
  -665
  -698
  -733
  -770
  -809
  -850
  -892
  -937
  -984
  -1,033
  -1,085
  -1,139
  -1,196
  -1,255
  -1,318
  -1,385
  -1,453
  -1,527
  -1,603
Free cash flow, $m
  935
  936
  939
  946
  954
  964
  977
  991
  1,007
  1,025
  807
  829
  852
  878
  906
  935
  967
  1,000
  1,036
  1,075
  1,115
  1,158
  1,203
  1,251
  1,302
  1,356
  1,412
  1,472
  1,535
  1,601
Issuance/(repayment) of debt, $m
  196
  217
  248
  278
  309
  339
  369
  399
  430
  461
  494
  527
  561
  596
  632
  670
  709
  750
  793
  837
  883
  931
  982
  1,034
  1,089
  1,147
  1,207
  1,271
  1,337
  1,406
Issuance/(repurchase) of shares, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash from financing (excl. dividends), $m  
  196
  217
  248
  278
  309
  339
  369
  399
  430
  461
  494
  527
  561
  596
  632
  670
  709
  750
  793
  837
  883
  931
  982
  1,034
  1,089
  1,147
  1,207
  1,271
  1,337
  1,406
Total cash flow (excl. dividends), $m
  1,130
  1,153
  1,187
  1,224
  1,262
  1,303
  1,345
  1,390
  1,437
  1,487
  1,300
  1,355
  1,413
  1,474
  1,538
  1,605
  1,676
  1,751
  1,829
  1,912
  1,998
  2,089
  2,185
  2,286
  2,392
  2,503
  2,620
  2,742
  2,871
  3,007
Retained Cash Flow (-), $m
  -91
  -94
  -107
  -120
  -134
  -146
  -160
  -173
  -186
  -200
  -214
  -228
  -243
  -258
  -274
  -290
  -307
  -325
  -343
  -362
  -382
  -403
  -425
  -448
  -471
  -496
  -522
  -550
  -578
  -608
Prev. year cash balance distribution, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash flow adjustment, $m
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
  0
Cash available for distribution, $m
  1,039
  1,059
  1,080
  1,104
  1,129
  1,156
  1,186
  1,217
  1,251
  1,287
  1,087
  1,127
  1,170
  1,216
  1,264
  1,315
  1,369
  1,426
  1,486
  1,549
  1,616
  1,686
  1,760
  1,838
  1,920
  2,007
  2,097
  2,193
  2,293
  2,399
Discount rate, %
  7.10
  7.46
  7.83
  8.22
  8.63
  9.06
  9.51
  9.99
  10.49
  11.01
  11.57
  12.14
  12.75
  13.39
  14.06
  14.76
  15.50
  16.27
  17.09
  17.94
  18.84
  19.78
  20.77
  21.81
  22.90
  24.04
  25.25
  26.51
  27.83
  29.22
PV of cash for distribution, $m
  971
  917
  862
  805
  746
  687
  628
  568
  510
  453
  326
  285
  246
  209
  176
  145
  118
  95
  74
  57
  43
  32
  23
  16
  11
  7
  5
  3
  2
  1
Current shareholders' claim on cash, %
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0
  100.0

Global Payments Inc. is a provider of payment technology services. The Company provides payment and digital commerce solutions. The Company operates through three segments: North America, Europe and Asia-Pacific. The Company's segments primarily provide payment solutions for credit cards, debit cards, electronic payments and check-related services. The Company's segments target customers in various industries, including financial services, gaming, government, healthcare, professional services, restaurants, retail, universities, not-for-profit organizations and utilities. It provides services across a range of channels to merchants and partners in over 30 countries throughout North America, Europe, the Asia-Pacific region and Brazil. The Company performs a series of services, including authorization, electronic draft capture, file transfers to facilitate funds settlement and certain exception-based, back office support services, such as chargeback and retrieval resolution.

FINANCIAL RATIOS  of  Global Payments Inc. (GPN)

Valuation Ratios
P/E Ratio 192.1
Price to Sales 10.9
Price to Book 9.1
Price to Tangible Book
Price to Cash Flow 47.7
Price to Free Cash Flow 58
Growth Rates
Sales Growth Rate -24%
Sales - 3 Yr. Growth Rate %
EPS Growth Rate %
EPS - 3 Yr. Growth Rate %
Capital Spending Gr. Rate -3.3%
Cap. Spend. - 3 Yr. Gr. Rate 1.9%
Financial Strength
Quick Ratio 2
Current Ratio 0
LT Debt to Equity 162%
Total Debt to Equity 183.6%
Interest Coverage 3
Management Effectiveness
Return On Assets 1.9%
Ret/ On Assets - 3 Yr. Avg. 4%
Return On Total Capital 1.7%
Ret/ On T. Cap. - 3 Yr. Avg. 5.4%
Return On Equity 4.6%
Return On Equity - 3 Yr. Avg. 17.3%
Asset Turnover 0.2
Profitability Ratios
Gross Margin 50.3%
Gross Margin - 3 Yr. Avg. 58%
EBITDA Margin 23.3%
EBITDA Margin - 3 Yr. Avg. 21.9%
Operating Margin 10.8%
Oper. Margin - 3 Yr. Avg. 14%
Pre-Tax Margin 7.9%
Pre-Tax Margin - 3 Yr. Avg. 11.8%
Net Profit Margin 5.7%
Net Profit Margin - 3 Yr. Avg. 8.4%
Effective Tax Rate 20.2%
Eff/ Tax Rate - 3 Yr. Avg. 21.9%
Payout Ratio 2.4%

GPN stock valuation input parameters

Revenue. Company's revenue (or sales) is always the starting point of any cash flow forecast. In the GPN stock intrinsic value calculation we used $3366 million for the last fiscal year's total revenue generated by Global Payments Inc.. The default revenue input number comes from 0001 income statement of Global Payments Inc.. You may change it if you feel that it should be adjusted for some unusual circumstances that are not expected to be repeated in the future or if you already know (from interim financial statements, for example) that this year's revenue is going to be quite different.

Revenue growth rate. Forecasted future revenue growth rate is the most important input parameter for the intrinsic value calculation. Unlike other input parameters that are reasonably expected to be in line with their historic averages or their historic trends, the revenue growth rate by and large is a wild card: nobody really knows what the company's revenue will be in the future. Of course, the level of unpredictability is different for different industries (utility companies being the most predictable and, thus, less risky).
    We use three input parameters to forecast the revenue growth rate in our GPN stock valuation model: a) initial revenue growth rate of 2% whose default value is the revenue growth rate in the most recent quarter compared to the quarterly revenue a year ago; b) terminal revenue growth rate of 5% whose default value is chosen to be close to the average nominal (i.e. not adjusted for inflation) GDP growth rate; and c) revenue decline factor of 0.9, which stipulates that revenue growth rate in each forecasted year will be equal to the difference of the revenue growth rate in the preceding year and the terminal revenue growth rate multiplied by this revenue decline factor (with the passage of time the revenue growth rate will be approaching the terminal revenue growth rate, but not quite reaching it - though the difference could be infinitesimally small).
    At the revenue decline factor of 1, the future revenue growth rate is forecasted to be constant and equal to the initial revenue growth rate. The smaller the revenue decline factor, the faster the revenue growth rate will approach the terminal revenue growth.

Discount rate. The discount rate is used for determining the present value of future cash flows: future cash flows are "discounted" as at normal conditions (that translate into positive expected return on investment) one dollar today is worth more than the same dollar in the future. Unlike all other valuation models, we use variable discount rate, i.e. it increases for each consecutive year. This is done to account for higher risk of cash flows coming in further in the future.
    The initial discount rate of 7.1%, whose default value for GPN is calculated based on our internal credit rating of Global Payments Inc., is applied to the cash flow expected to be received a year from now (well, actually, to be precise, in the financial year following the base year - the last year for which we have financial statements). For each consecutive year the discount rate is multiplied by the discount rate multiplier of 1.05, e.i. each year it increases by 5%. Feel free to change this number to correspond to your level of risk assessment of Global Payments Inc..
    By the way, it is easy to set the discount rate to be constant (this would make comparison with other valuation models easier): just set the discount rate multiplier equal to 1 and chose the magnitude of the initial discount rate to your liking.

Variable cost ratio is the ratio of variable costs (i.e. costs that fluctuate with fluctuation of the volume of production) to the revenue expressed as a percentage. In the calculation of intrinsic value of GPN stock the variable cost ratio is equal to 85.9%.

Fixed operating expenses is just that - expenses that are not dependant on the volume of production. They are set to $0 million in the base year in the intrinsic value calculation for GPN stock. These expenses increase with the level of inflation in subsequent years.

Interest rate on debt is the average all-in rate of interest paid by the company on its debt. It is set at 5.4% for Global Payments Inc..

Corporate tax rate of 27% is the nominal tax rate for Global Payments Inc.. In reality, companies find ways to pay much less taxes than that or not to pay them at all.

Cash flow adjustment could be used for any adjustment the investor deems necessary. Most commonly we use this field to account for stock options-related effects in excess of what is reported on the company's income statement. The cash flow adjustment is expressed as a percentage of the revenue, and in the current valuation of the GPN stock is equal to 0%.

Production assets are the company's assets used for manufacturing products or provision of services. In the valuation model input table they are expressed as a percentage of revenue and for GPN are equal to 142.6%.

Life of production assets of 17.2 years is the average useful life of capital assets used in Global Payments Inc. operations. It is used to calculate yearly capital expenditures needed to keep these assets in good order - we call it the maintenance CAPEX.

Working capital is the difference between the company's current assets and liabilities. In the model we use the ratio of working capital to revenue, which for GPN is equal to -8.5%. A negative number means that the company is apt at using financial resources of its suppliers and customers; a large positive number, on the other hand, means that it either provides in-kind financing to others or is not good at managing its inventories.

Book value of equity - $3991.407 million for Global Payments Inc. - is used in calculation of the "floor" for intrinsic valuation based on the discounted cash flow (DCF) method. Even if the prospects are very bad for a company, its assets could always be sold now for their current fair market value.

Shares outstanding of 157.620 million for Global Payments Inc. is needed to calculate the intrinsic value of one share.

Market capitalization is used here only for reference purposes and as a quick check that the share price and the number of shares outstanding numbers are correct - something especially to be cognizant about at stock splits. So, the market capitalization of Global Payments Inc. at the current share price and the inputted number of shares is $24.9 billion.

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