Fiserv Inc Valuation – April 2018 $FISV

Company Profile (excerpt from Reuters): Fiserv, Inc., incorporated on February 19, 1992, is a provider of financial services technology. The Company provides account processing systems; electronic payments processing products and services, such as electronic bill payment and presentment services, card-based transaction processing and network services, automated clearing house (ACH) transaction processing, account-to-account transfers, and person-to-person payments; Internet and mobile banking systems, and related services, including document and payment card production and distribution, check processing and imaging, source capture systems, and lending and risk management products and services. The Company operates through two segments: Payments and Industry Products (Payments) and the Financial Institution Services (Financial). The Payments segment provides electronic bill payment and presentment services, Internet and mobile banking software and services, person-to-person payment services, debit and credit card processing and other electronic payments software and services. The Financial segment provides banks, thrifts, credit unions, and leasing and finance companies with account processing services, item processing and source capture services, loan origination and servicing products, cash management and consulting services, and other products and services. The Company serves banks, thrifts, credit unions, investment management firms, leasing and finance companies, retailers, merchants, mutual savings banks and building societies.

FISV Chart

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FISV – April 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $28,978,821,446 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 1.02 Fail
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Fail
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 233.13% Pass
6. Moderate PEmg Ratio PEmg < 20 28.08 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 10.90 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 1.02 Fail
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 132.35 Fail
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Fail
5. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $2.50
MG Growth Estimate 15.00%
MG Value $96.16
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $36.22
MG Value based on 0% Growth $21.23
Market Implied Growth Rate 9.79%
Current Price $70.13
% of Intrinsic Value 72.93%

Fiserv Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the low current ratio, poor dividend history, and the high PEmg and PB ratios. The Enterprising Investor has concerns regarding the level of debt relative to the current assets, and the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.21 in 2014 to an estimated $2.5 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 9.79% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fiserv Inc revealed the company was trading above its Graham Number of $20.81. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 28.08, which was below the industry average of 32.93, which by some methods of valuation makes it one of the most undervalued stocks in its industry. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-13.15.

Fiserv Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) -$13.15
Graham Number $20.81
PEmg 28.08
Current Ratio 1.02
PB Ratio 10.90
Current Dividend $0.00
Dividend Yield 0.00%
Number of Consecutive Years of Dividend Growth 0

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Total Current Assets $1,975,000,000
Total Current Liabilities $1,938,000,000
Long-Term Debt $4,897,000,000
Total Assets $10,289,000,000
Intangible Assets $7,472,000,000
Total Liabilities $7,558,000,000
Shares Outstanding (Diluted Average) 424,600,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.04
Dec2017 $2.89
Dec2016 $2.08
Dec2015 $1.50
Dec2014 $1.49
Dec2013 $1.22
Dec2012 $1.11
Dec2011 $0.82
Dec2010 $0.82
Dec2009 $0.77
Dec2008 $0.87
Dec2007 $0.65
Dec2006 $0.64
Dec2005 $0.68
Dec2004 $0.48
Dec2003 $0.40
Dec2002 $0.34
Dec2001 $0.27
Dec2000 $0.23
Dec1999 $0.18
Dec1998 $0.15

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.50
Dec2017 $2.10
Dec2016 $1.63
Dec2015 $1.34
Dec2014 $1.21
Dec2013 $1.03
Dec2012 $0.91
Dec2011 $0.80
Dec2010 $0.78
Dec2009 $0.75
Dec2008 $0.71
Dec2007 $0.61
Dec2006 $0.56
Dec2005 $0.50
Dec2004 $0.39
Dec2003 $0.32
Dec2002 $0.27

Recommended Reading:

Other ModernGraham posts about the company

Fiserv Inc. Analysis – 2015 Annual Update $FISV
15 Companies in the Spotlight This Week – 5/31/14
Fiserv Inc. 2014 Annual Valuation $FISV

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The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.






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