Fiserv Inc Valuation – February 2019 $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.
Downloadable PDF version of this valuation:
ModernGraham Valuation of FISV – February 2019
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 | $33,052,344,000 | Pass | |
| 2. Sufficiently Strong Financial Condition | Current Ratio > 2 | 1.11 | 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 | 157.29% | Pass | |
| 6. Moderate PEmg Ratio | PEmg < 20 | 29.55 | Fail | |
| 7. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 14.91 | 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 | 1.11 | Fail | |
| 2. Sufficiently Strong Financial Condition | Debt to NCA < 1.1 | 27.83 | 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 | $2.86 |
| MG Growth Estimate | 15.00% |
| MG Value | $110.10 |
| Opinion | Fairly Valued |
| MG Grade | D |
| MG Value based on 3% Growth | $41.47 |
| MG Value based on 0% Growth | $24.31 |
| Market Implied Growth Rate | 10.52% |
| Current Price | $84.50 |
| % of Intrinsic Value | 76.75% |
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 Fairly Valued after growing its EPSmg (normalized earnings) from $1.4 in 2015 to an estimated $2.86 for 2019. This level of demonstrated earnings growth supports the market’s implied estimate of 10.52% 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 within a margin of safety relative to the price.
At the time of valuation, further research into Fiserv Inc revealed the company was trading above its Graham Number of $21.04. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 29.55, which was above the industry average of 29.23. Finally, the company was trading above its Net Current Asset Value (NCAV) of $-16.67.
Fiserv Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D.
Stage 3: Information for Further Research
| Net Current Asset Value (NCAV) | -$16.67 |
| Graham Number | $21.04 |
| PEmg | 29.55 |
| Current Ratio | 1.11 |
| PB Ratio | 14.91 |
| Current Dividend | $0.00 |
| Dividend Yield | 0.00% |
| Number of Consecutive Years of Dividend Growth | 0 |
Useful Links:
| ModernGraham tagged articles | Morningstar |
| Google Finance | MSN Money |
| Yahoo Finance | Seeking Alpha |
| GuruFocus | SEC Filings |
Most Recent Balance Sheet Figures
| Balance Sheet Information | 12/1/2018 |
| Total Current Assets | $2,224,000,000 |
| Total Current Liabilities | $2,010,000,000 |
| Long-Term Debt | $5,955,000,000 |
| Total Assets | $11,262,000,000 |
| Intangible Assets | $7,845,000,000 |
| Total Liabilities | $8,969,000,000 |
| Shares Outstanding (Diluted Average) | 404,700,000 |
Earnings Per Share History
| EPS History | |
| Next Fiscal Year Estimate | $3.42 |
| Dec2018 | $2.87 |
| Dec2017 | $2.89 |
| Dec2016 | $2.08 |
| Dec2015 | $1.50 |
| Dec2014 | $1.49 |
| Dec2013 | $1.22 |
| Dec2012 | $1.11 |
| Dec2011 | $1.64 |
| 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 |
Earnings Per Share – ModernGraham History
| EPSmg History | |
| Next Fiscal Year Estimate | $2.86 |
| Dec2018 | $2.44 |
| Dec2017 | $2.10 |
| Dec2016 | $1.63 |
| Dec2015 | $1.40 |
| Dec2014 | $1.32 |
| Dec2013 | $1.19 |
| Dec2012 | $1.13 |
| Dec2011 | $1.08 |
| Dec2010 | $0.78 |
| Dec2009 | $0.75 |
| Dec2008 | $0.71 |
| Dec2007 | $0.61 |
| Dec2006 | $0.56 |
| Dec2005 | $0.50 |
| Dec2004 | $0.39 |
| Dec2003 | $0.32 |
Recommended Reading:
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Disclaimer:
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.
