Over the past six months, Fiserv’s stock price fell to $52.79. Shareholders have lost 13.9% of their capital, which is disappointing considering the S&P 500 has climbed by 14%. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Fiserv, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Fiserv Will Underperform?
Even though the stock has become cheaper, we don’t have much confidence in Fiserv. Here are three reasons we avoid FISV, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.
Regrettably, Fiserv’s revenue grew at a tepid 5.9% compounded annual growth rate over the last five years. This was below our standard for the financials sector.
2. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Fiserv’s EPS grew at 8.7% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 5.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
3. Previous Growth Initiatives Haven’t Impressed
Return on equity, or ROE, quantifies financial firm profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, Fiserv has averaged an ROE of 9.9%, uninspiring for a company operating in a sector where the average shakes out around 10%.
Final Judgment
Fiserv falls short of our quality standards. After the recent drawdown, the stock trades at 7.2× forward P/E (or $52.79 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are superior stocks to buy right now. We’d recommend looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of Fiserv
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