Fidelity National Information Stock: Cheap Fintech Play (NYSE:FIS)

Fidelity National Information Stock: Cheap Fintech Play (NYSE:FIS)

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Inflation, currency moves, and higher interest rates have taken their toll on corporate earnings this year. Many pundits say EPS estimates need to fall further, particularly for the tech space that has significant exposure to all three of the aforementioned market headwinds. One established fintech firm has decent expected profit growth, but many macro risks are top of mind among investors. Shares have sunk as a result.

1-Year Moves: Dollar +19%, Intermediate-Term Treasurys -13%

1-Year Moves: Dollar +19%, Intermediate-Term Treasurys -13%

Stockcharts.com

According to Bank of America Global Research, Fidelity National Information Services (NYSE:FIS) employs more than 47,000 people worldwide. FIS provides software, services, and outsourcing of technology to a wide range of institutions in the financial services industry. In 2021, FIS generated revenues of $13.88B, adjusted EBITDA of $6.1B, EPS of $6.55, and $3.6B in free cash flow. Recently, FIS announced that Erik Hoag will succeed Woody Woodall as the new CFO effective Nov. 4.

The Jacksonville, Florida-based IT Services industry company in the Information Technology sector, listed on the S&P 500, trades at a high 65.3 trailing 12-month GAAP price-to-earnings ratio and pays a 2.1% dividend yield, according to The Wall Street Journal. The firm’s non-GAAP earnings are much higher, resulting in a lower earnings multiple of 11.4 using forward operating earnings estimates.

Analysts at BofA see earnings climbing at a healthy pace through 2024. The Bloomberg consensus forecast is even more bullish on the profitability of FIS in the years ahead. Dividend investors should also be optimistic, as the payout amount is seen as rising more than 20% over the next two years.

With earnings growth and a rising yield, the fundamentals look solid. Moreover, FIS’s EV/EBITDA multiple is not too high given its growth rate, and free cash flow yield is decent and rising.

FIS: Earnings, Dividend, Valuation Forecasts

FIS: Earnings, Dividend, Valuation Forecasts

BofA Global Research

Looking ahead, Wall Street Horizon reports that FIS has an ex-dividend date upcoming on Sept. 15. It will be paid on Sept. 30 before the company’s Q3 earnings date of Thursday, November 3 BMO.

FIS: Corporate Event Calendar

FIS: Corporate Event Calendar

Wall Street Horizon

Remarkably, FIS has beaten analyst EPS expectations in each of the past 16 quarters, according to Seeking Alpha.

FIS: A Strong Earnings Beat Rate History

FIS: A Strong Earnings Beat Rate History

Seeking Alpha

The Technical Take

While the fundamentals and valuation look ideal for FIS, its stock chart warrants caution. Shares hover near 4-year lows after falling more than 40% from an all-time high notched in early 2020. The stock had a bearish triple top pattern over more than a year’s time, but then ultimately fell during the tech selloff starting in 2021. $160 was the peak, then $120-$125 support broke then failed at a recovery attempt earlier this year.

Fast-forward to today, and the stock is probing new lows. The bears appear in control. I see support in the $73 to $80 area based on a measured move price objective off the $120 to $160 prior range ($160 – $120 = $40, $120 – $40 = $80) and a key pivot point from 2015 and 2016 at $73.

FIS: Shares Threatening New Lows Amid A Bear Market Off The $160 Peak

FIS: Shares Threatening New Lows Amid A Bear Market Off The $160 Peak

Stockcharts.com

The Bottom Line

FIS has a solid valuation and has been hit by macro forces out of its control. I see it as a terrific value stock at the moment, though the technicals suggest more bearish price action to come. Long-term investors should build a position with the expectation of 10% to 15% more downside. In this case, the fundamentals outweigh the charts. Shares look good here.

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