We came across a bullish thesis on Global Payments Inc (GPN) on ValueInvestorsClub by beethoven. In this article we will summarize the bulls' thesis on GPN. Global Payments shares were trading at $95.03 when this thesis was published, vs. closing price of $110.69 on Sep 20.

Global Payments stands out as a key player in the financial technology and payment processing sector providing a wide array of services to companies worldwide. The company makes money through three main areas: Merchant Solutions, Issuer Solutions, and Owned Software. These serve customers in many fields, including retail, healthcare, education, and small business services. This helps it keep its place in established markets while staying up-to-date in newer, tech-driven spaces. The company's customers come from various industries such as dental, vision, automotive, construction, veterinary, and many other small and medium-sized business markets. These niche areas don't face as much threat from new-age companies like Adyen or Stripe. This puts Global Payments in a strong position as a vital provider of digital payment services.

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Despite its strong market position, GPN's stock has faced difficulties trading at 2017 levels and dropping 20% since its Q1 2024 earnings report. The stock's decline stems from unmet margin growth goals and poor communication with shareholders by management. GPN's leaders haven't kept things open when it comes to cash flow reporting, which has shaken investor trust. The lack of clarity about "adjusted free cash flow" and questionable actions such as not showing key performance slides during presentations, have also played a part in the stock's poor performance.

Despite this, a strong case exists for purchasing GPN stock. The firm's stock price sits at historically low levels, with a P/E ratio unseen for 20 years. Its FCF forecasts point to a big comeback once working capital problems clear up. To be exact, GPN's cash use from settlement processing duties (because of timing gaps) should return to normal after Q2 2024 leading to better FCF. Experts think the company will produce over $10 per share in FCF for 2024 and 2025 bringing its FCF-to-adjusted EPS ratio back to a good range.

GPN's true worth shines through its strong business areas. The Merchant Solutions part faces tough competition but keeps customers well in North America, and is growing in online sales. The Issuer Solutions part is a world leader and keeps winning more of the market in Europe. Looking at each part shows GPN's stock could climb to $145 giving a 53% gain, with a 13% chance of dropping to $83. This makes it a good buy at today's price.

GPN is not on our list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 67 hedge fund portfolios held GPN at the end of the second quarter which was 53 in the previous quarter. While we acknowledge the potential of GPN as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as GPN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.