Global Payments

Global Payments Inc receives a 5-star quantitative star rating, illustrating our stance that this share class offers a compelling opportunity for investors. The stock currently trades at a 27% discount to our quantitative fair value estimate of $111.62 per share; however, some caution is warranted due to this estimate's medium uncertainty rating.

The firm's balance sheet strengthens our estimated fair value. Leverage can enable a company to invest in growth, potentially boosting shareholder value more than equity financing alone. Reflecting the firm's leverage is its EBITDA/interest coverage ratio of 4.2, which falls in the bottom 30% compared with peers globally. Although the firm's ability to cover interest payments with EBITDA is limited, shares could sharply rebound if economic circumstances change or recent investments reduce fears of default. We believe this is a sign that shares could be cheap.

The firm's valuation metrics are an additional encouraging factor. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's book value yield of 100.5%, a core component of valuation, lies in the top 30% compared with peers globally. The market price is low relative to the book (accounting) value of the company's equity, which further promotes our favorable price/fair value ratio.

The company's narrow economic moat rating suggests it should be able to maintain robust profitability for a decade or longer before competition erodes its advantage. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.