Fiserv, Inc.

Fiserv, Inc. (NASDAQ: FISV) is a payments and financial services technology company based in the United States. Account processing and digital banking solutions, card issuer processing and network services, payments, e-commerce, merchant acquiring and processing, and the Clover cloud-based point-of-sale solution are all services provided by the company. Its operating segments are 1) Merchant Acceptance, which provides merchants all around the world with a comprehensive range of products and services, 2) Financial Technology, which offers financial institutions with the technology they require to conduct their businesses and 3) Payments and Network, which includes the products and services needed to process digital payments.

Why Should Investors Make an Exit?

• Weak Liquidity Profile: The company's current ratio at the end of FY21 is 1.03x, compared to the industry median of 1.77x. This implies relatively lackluster liquidity profile against the industry median.
• Industry Below ROE: FISV reported ROE of 4.2% in FY21 vs. Industry median of 5.4%. This implies that FISV generating a lower return on shareholder’s money.
• Leveraged Balance Sheet: The company is more exposed to balance sheet risk than its peers, with a Debt/Equity ratio of 0.69x as of December 31, 2021, compared to the industry norm of 0.51x. Furthermore, its long-term debt-to-total-capital ratio was 39.0%, compared to the industry average of 24.1% for the same period. These leveraged financials put the corporation at risk of huge swings due to the slightest adjustment in interest rates.
• Competition Risk: FISV competes directly with financial services technology and payment system providers, data processing affiliates of large companies, processing centres owned or operated as user cooperatives, and others in a highly competitive IT Services industry. In addition, there has been a lot of merger and acquisition activity in the managed care and complementary industries. If this industry continues to consolidate, the company's financial and operational performance may suffer.

Valuation Methodology: Price/Earnings Per Share Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

Stock Recommendation:

FISV's share price has declined 5.93% in the past nine months and is currently leaning towards the lower band of the 52-week range of USD 89.91 to USD 127.34. We have valued the stock using the Price/Earnings-based relative valuation methodology and arrived at a target price of USD 88.77.

Considering the company's relatively leveraged balance sheet, declining liquidity profile and ROE, current valuation and associated risks. We recommend a "Sell" rating on the stock at the closing price of USD 102.67, down 0.65% as of April 06, 2022.

Three-Year Technical Price Chart (April 06, 2022). Source: REFINITIV, Analysis by Kalkine Group

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.

Disclaimer

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