Fidelity National Information Services, Inc. (FIS) in Jacksonville, Fla., is a leading technology solutions provider for banks and capital market firms. FIS is ranked #241 on the 2021 Fortune 500 list and is a member of the S&P 500 index.
Last week, the company was awarded the Best Performing Gateway platform for its exceptional performance across transaction and gateway check benchmarks by The Strawhecker Group. However, the company has an ISS QualityScore of 5, indicating a relatively high governance risk.
Shares of FIS have slumped 28.8% in price over the past year and 12.4% year-to-date. The bleak investor sentiment can be attributed to surging market volatility amid rising geopolitical tensions and continued macroeconomic headwinds.
Here is what could shape FIS’ performance in the near term:
Mixed Growth Story
FIS’ revenues have increased at an 18.1% CAGR over the past three years, while its levered free cash flow has risen at a 36.8% CAGR over this period. However, the company’s operating income has slumped at a rate of 6.8% per annum over the past three years. Its net income declined at a 21% CAGR over the past three years, while its EPS fell at a rate of 36% per annum over this period.
In addition, FIS’ trailing-12-month revenues rose 10.6% year-over-year, while its net income and EPS improved 163.9% and 168%, respectively, year-over-year. However, the company’s trailing-12-month EBIT has slumped 18.7% over the past year, while its trailing-12-month levered free cash flow declined 6% year-over-year.
Operational Risks
FIS highlighted multiple uncertainties that might hurt its business operations and financials in its forward-looking statements. The instability of financial markets and reductions in consumer and business spending due to the resurgence of COVID-19 is expected to impact FIS’ growth prospects in the near term. Also, the company bears the risk of losses in the event of defaults, which could adversely affect its liquidity.
Macroeconomic uncertainties, including changes in international lending patterns, the imposition of cross-border financial transaction regulations, and currency fluctuations, are expected to impact FIS operations significantly. In addition, immense competition in the U.S. and international banking landscape might affect FIS’ ability to attract new and/or retain existing customers.
Consensus Rating and Price Target Indicate Potential Upside
Among the 21 Wall Street analysts that rated FIS, 17 rated it Buy while four rated it hold. The 12-month median price target of $139.10 indicates a 45.8% potential upside from yesterday’s closing price of $95.41. The price targets range from a low of $112.00 to a high of $176.00.
POWR Ratings Reflect Uncertainty
FIS has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
FIS has a C grade for Quality and Value. The company’s lower-than-industry net income margin and ROE of 3% and 0.86%, respectively, justify the Quality grade. In addition, FIS’ 13.11 non-GAAP forward P/E multiple is 34% lower than the 19.86 industry average. However, the stock’s 3.92 forward Price/Sales ratio is slightly higher than the 3.47 industry average, and in sync with its Value grade.
Among the 81 stocks in the Technology – Services industry, FIS is ranked #52.
Beyond what I have stated above, view FIS ratings for Growth, Sentiment, Stability, and Momentum here.
Bottom Line
FIS approved a share repurchase program of up to $100 million on Feb. 1, while simultaneously approving an 11% rise in its quarterly dividend payout to 39 cents per share. However, FIS’ shares have slumped more than 19% in price since then, reflecting investor concerns regarding the broader market and operational risks faced by FIS. Thus, we think investors should wait until the broader markets stabilize before investing in FIS.
How Does Fidelity National Information Services, Inc. (FIS) Stack Up Against its Peers?
While FIS has a C rating in our proprietary rating system, one might want to consider looking at its industry peers, Sanmina Corporation (SANM), Celestica, Inc. (CLS), and NetScout Systems, Inc. (NTCT), which have an A (Strong Buy) rating.
FIS shares were trading at $93.32 per share on Wednesday morning, down $2.09 (-2.19%). Year-to-date, FIS has declined -14.50%, versus a -9.73% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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