A Financial Analysis of Global Payments Incorporated

As the great Warren Buffet alluded to when asked how he became such an enormously successful trader, he acknowledged using simple means to choose certain corporations based on characteristics he was familiar with. While it is fair to say many traders contain the necessary skills required to do analysis of companies they are knowledgeable of, such a process may either involve a too rudimentary process to seem explosive on the upside or may contain profound virtues such as patience, which, unfortunately, not many traders can be attributive of. Nevertheless, after compiling some careful research, I have found a company, Global Payments Incorporated (GPN), which encompasses the ideals presented by Mr. Buffet in terms of providing a simple, but rewarding, procedure to accrue a copious amount of new capital.

When examining the profile listed under Yahoo Finance of what Global Payments does, a simple analysis will lead many investors to believe this company to be involved with the transfer of money regarding credit and debit card transactions and consumer movements as well. Understanding what this company does is crucial, because, as an investor, you are always desiring to look for companies which control a large percentage of the market and has the capabilities to provide not only growth for the short run but value for the long run as well. With Global Payments, after looking for other competitors of the same services, I have located specific companies such as Thomson Corporation which is involved in the same sector as Global but does not necessarily provide the exact same services. When such a comparison is made, it is evident that Global controls a large market share, at least publicly, of what it produces, and should be favored in terms of amassing larger revenue and earnings data coupled with higher positive margins regarding each category. Furthermore, because this corporation engages in a service which is fairly solidified of how it will hold up in terms of business for the next 20 years or so, there should not be too much question of how long such a company will be able to compete in the battle of innovation. In addition, because Global Payments is a worldwide corporation as suggested by its name, with liquidity spreading throughout the world, there is tremendous opportunity, with growing markets in China and India and a strong economic presence in already developed nations such as found in Europe, of the money transferring process to expand and provide more than adequate service for Global Payments to handle. Thus, because of the large concentration ratio Global encompasses, as well as the opportunities which can be traced in the future, there is strong potential for this company to provide shareholders with continuous capital gains.

While the future may look bright for any company relative to the service Global Payments provide, with out a strong fundamental foundation, regardless of the outputted products, a company will not be able to compete. Fortunately such ineptitude is not found with Global. Looking over the past two years, Global has increased its revenue, chronologically, 24 and 16 percent, while maintaining its costs by garnering a gross profit growth of 32 and 23 percent respective to the revenue numbers. The EBIDA has also not diminished in value after taxes and interest, among others, which calculated as net income, regarding its cash flow, has gone up 50% from 2004 to 2005 and 35% the subsequent years. Such cash allows Global Payments, to invest into more capital which will lead to more economies of scale, providing lower costs, higher revenue, and larger capital gains: a process undeniably important when considering the tremendous changes regarding the online and global portion of this business. In addition, one of the best indicators I have found is the current ratio continuing to rapidly increase, as assets, both current and total, continue to rise in dramatic fashion, while both total and current liabilities have actually decreased over the previous two years. All these fundamentals lead to a P/E ratio of near 28 which may seem a bit high in relation to its PEG ratio, but with a forward multiple near 22 and growth expected regarding its placement in terms of world expansion, both ratios should fall in the near future with my expectations of the PEG to fall below one shortly. In addition the price to book ratio, because of the fall liabilities and strong assets remains low which should, coupled with all the other positive fundamental inquiries help this stock to reach new historical records in the foreseeable future.

When I mention Global being close to a record high, it may seem foolish for such a statement to be made as this company is less than five dollars, or about 8%, away from such a number. Nevertheless, by examining the charts, there are definite indicators which illustrate the rising possibilities that Global Payments will provide for its shareholders. Opening in 2001, over the last five years, Global Payments, trading publicly, has provided its shareholders much rejoice after climbing more than nearly 450%. Many investors may claim that such growth, regarding share price, has leveled off after breaking even in 2006, but I foresee, because of the growing liquidity in the growing market, a strong rebound in 2007, as many analysts have predicated, based on historical data, to be a strong year for the stock market. In addition, since October, when Global had a strong share price growth relative to high volume, this company, along with the market in general, has grown fairly well during the past three months. I expect, for the short run, for this growth to sustain, as no high level volume sell offs have occurred, providing short term shareholders some profit. In relation to the long run, because Global has historically had an amazing boost during its history, because of its concentration ratio and its global presence, there is tremendous opportunity for capital gains to be earned over the next few decades, allowing for strong shareholder support in the future.

Therefore, after examining the charts, fundamentals, and strong control Global Payments has in relation to the rest of its specific sector, there is strong potential for this company to provide shareholders with significant capital gains in both the long and short run. Once again, Warren Buffet attributes much of his success to choosing stocks based on rudimentary products and services which have a large control over its respective market. When looking at what Global Payments does, such thought process, in relation to Buffet?s ideal becomes amazingly apparent when buying shares of this company.

Dennis Biray presents advice on all kinds of topics ranging from finance and investing to fitness to sports. For more information email him at dbiray@gmail.com, or to view other articles written by him visit http://www.biraynetworks.co.nr