Riding on a strong growth momentum ahead of its second quarter
earnings release, the shares of
Total System Services Inc.
) reached a new 52-week high of $25.28 on Jul 9. This surpassed
its previous high of $24.90 on Monday. This Zacks Rank #2 (Buy)
stock escalated about 8.8% in the last 52 weeks.
Yesterday's closing price represents a strong a year-to-date
return of about 19.1% as compared with the S&P 500 index
return of 17.8%. Average volume of shares traded over the last
three months stands at approximately 1,468.7K.
On Apr 23, Total System reported first-quarter 2013 earnings
of 33 cents per share that fell short of the Zacks Consensus
Estimate by a penny. However, the results were higher than 30
cents recorded in the year-ago quarter. The company delivered
positive earnings surprise in 2 of the last 4 quarters, with an
average beat of about 1.14%.
Total System's growth is driven by its diversified product
portfolio, technical competence and expansion into high-potential
emerging regions via strategic acquisitions and alliances.
Improvement in client accounts and higher long-term contracts
further enhance transaction volumes, which bodes well for both
the operating and competitive leverage.
The recent acquisition of NetSpend is expected to weigh on the
expense and cash flow for some time. However, the long-term
growth outlook associated with the acquisition, an optimistic
guidance for 2013 as well as an effective and consistent capital
deployment plan instils investor confidence.
Further, Total System appears to be an undervalued stock. The
shares are trading at a 7.9% discount to the peer group average
on a forward price-to-earnings basis and 17.7% on a price-to-book
While return on equity of 17.4% is below the peer group
average of 20.1%, return on assets of 12.5% is above the peer
group average of 9.5%. The estimated long-term earnings growth
rate is pegged at 11.6%, lower than the peer group average of
Apart from Total System, other outperformers in the electronic
payment processing sector include
Heartland Payment Services Inc.
). All these stocks carry a Zacks Rank #2 (Buy).
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