6 Reasons Why Total System (TSS) Holds Promise For Investors

Estimates for Total System Services, Inc. (NYSE:TSS) have been revised upward over the past 90 days, reflecting analysts’ confidence in the stock. The stock has seen the Zacks Consensus Estimate for 2018 and 2019 earnings being raised 14.8% and 12% to $4.17 and $4.68, respectively.

The company is well-known as one of the world's largest entities for outsourced payment services, offering electronic payment processing, merchant services and related services to financial and non-financial institutions in the United States and internationally.

Shares of this Zacks Rank #2 (Buy) payment processor have outperformed its industry in a year’s time. The stock has soared 61.5% compared with the industry’s surge of 31.8%.

Total System carries an impressive Growth Score of A. Back-tested results show that stocks with a Growth Score of A or B when combined with a bullish Zacks Rank #1 (Strong Buy) or 2 (Buy), comfortably outperform other stocks.

Let’s focus on the factors that make Total System an economically viable pick for investors.

Solid 2018 Guidance: The company expects current-year adjusted earnings per share in the range of $4.10-$4.20, reflecting 22-25% growth over the bottom line in 2017. It also projects net revenues in the $3.65-$3.75 billion band, representing a 7-10%% rise over the 2017’s registered top line. This upbeat view further instills shareholders' optimism on the stock.

Consistent Top-line Growth: Total System has witnessed steady revenue growth over the past several years at a three-year CAGR of 27%. The company is expected to retain its revenue momentum going forward on the back of a strong market position and a robust core and expansion of service offerings. business, consistently being driven by new deals, renewed agreements, accretive acquisitions. Recently in the first quarter of 2018, the company has inked a deal with Walmart Inc. (NYSE:WMT) per which Total System’s new patent pending payment solution, Advanced AuthControl, will be implemented at Walmart and Sam’s Clubs locations across the nation. This strategic relationship is likely to boost the company’s extensive network of stores as well as the Directed Spend platform to serve its improved wellness incentive programs with more ease.

Strong Capital Position: A steady generation of cash flows enables Total System to deploy capital effectively in order to enhance shareholders’ value. Over the last four years, the company returned more than $1 billion to shareholders in the form of share repurchases and dividends. This further instills investor optimism in the stock.

Sturdy Merchant Solutions Segment: The company’s merchant services segment has been routinely delivering a solid performance. The acquisitions of TermNet, Vanguard Payment Systems, TransFirst and Cayan have significantly contributed to the segment’s turnover. Riding high on the company’s potent distribution network, product set, channel diversification and a rapidly-growing integrated channel, management expects its merchant segment to further witness growth going forward.

Positive Earnings Surprise History: The company boasts an encouraging earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters with an average beat of 6.6%. This trend of consecutive estimate beats indicates the company’s operational excellence.

Attractive Valuation: Going by the price to earnings (P/E) ratio, Total System is trading at a trailing 12-month P/E multiple of 26.6x, lower than the industry average of 29.4x. The company’s valuation indicates that the stock is relatively underpriced compared with its peers.

Other Stocks to Consider

Investors interested in the Financial Transaction Services industry can also consider a couple of other top-ranked stocks in the same space like Mastercard Inc. (NYSE:MA) and Global Payments Inc. (NYSE:GPN) , each carrying the same bullish Zacks Rank of 2 as Total System. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Mastercard is a leading global payment solutions company. Its earnings surpassed estimates in three of the last four quarters with an average positive surprise of 6%. Shares of Mastercard have jumped 53.4% in a year, outperforming the industry.

Global Payments is a leading provider of payment technology services that delivers innovative solutions globally. The company’s earnings exceeded estimates in each of the trailing four quarters with an average beat of 4%. The stock has rallied 41.1% in the last 12 months, ahead of the industry it belongs to.

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