Global Payments Update

Cheap based on the P/E level, on an EV/FCF basis not so much

I am currently screening for interesting companies and in the process, Global Payments caught my eye (not in the positive sense). Net debt increased from 12.7 to 16.2 billion USD in Q1/23. With a market cap of $27B, this is a significant increase.

The debt came from the acquisition of Evo Payments. EVO was acquired for $4B, a premium of about 40% to its former stock price.

About EVO: EVO is also a payment provider, but its track record is not great.

Fluctuating revenues, with growth in the last two years and 2022 still below the level of 2018. Profitability was just about there and debt also increased in the last years.

Free cash flow also shows no steady growth and was $127m in 2022.

At a takeover price of $4bn, which Global Payments paid, this gives a P/E of 309 and an EV/FCF of 33.8. This is far too expensive in the current environment and I don't like it at all.

At the current free cash flow of 1.6 billion per year, it would take 10 years to pay off the net debt. With 4.5Bn of long-term debt due in the next 3 years and in need of refinancing you can expect rising intereset expenses in the next years.

The interest expense in the last 12 months have been already $467m and are rising quarter by quarter.

Summary:

Global Payments currently has an EV/FCF of 27, which is not cheap even after the 55% drop in the share price.

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Invest at your own risk, this is not financial advice!