Fiserv - Investing In Transforming Leaders Rather Than Disruptors

Jan. 14, 2022 11:18 AM ETFiserv, Inc. (FISV)FIS13 Comments

Summary

  • Fiserv is valued as a slow-growth and low return on capital legacy business, although this does not appear to be the case.
  • At present, the expected topline growth rate is far from spectacular, but parts of the business are growing fast and could result in a multiple repricing.
  • Due to the acquisition of First Data, the company's improving profitability is a better measure of business performance than return on capital is.

Fiserv Beaverton Office

hapabapa/iStock Editorial via Getty Images

Investment thesis

At present, high-quality businesses that are also adapting to the disruptive technologies appear as a safer choice for long-term investors when compared to the highly-priced disruptors.

To begin with, lower-priced companies with highly

ARKK vs. VLUE price % change
Data by YCharts

Fiserv vs. Block: price % change
Data by YCharts

S&P 500 vs. Top 10 Companies

Prepared by the author, using data from Yahoo! Finance

Revenue growth vs. P/E in the cloud space

Prepared by the author, using data from Seeking Alpha

U. S. 10-year Treasury Yield % vs. Treadline slope

Prepared by the author, using data from Seeking Alpha and treasury.gov

ROTC

Prepared by the author, using data from Seeking Alpha

Block Expected Growth

Seeking Alpha

Expected Revenue Growth

Prepared by the author, using data from Seeking Alpha

Fiserv growth by segment

Prepared by the author, using data from FISV 10-Q SEC Filing

FISV growth

Seeking Alpha

Block GPV growth

Block Q3 2021 shareholder letter

FISV profitability

Seeking Alpha

Goodwill and Intangible Assets to Total Assets Ratio

Prepared by the author, using data from Seeking Alpha

FISV Segments

Prepared by the author, using data from annual and quarterly reports

Fiserv and First Data combined revenue

Fiserv to Combine with First Data Presentation

comparable deals

Fiserv and First Data merger proposal from sec.gov

FISV vs. FIS margins by segment

Prepared by the author, using data from annual and quarterly reports

Merchant Acceptance performance

Fiserv Q3 2021 Earnings Presentation

retail sales

fred.stlouisfed.org

Interest coverage

Prepared by the author, using data from annual and quarterly reports

This article was written by

Vladimir Dimitrov, CFA profile picture
4.33K Followers
Investment strategy for those seeking steady and above-market returns

Vladimir Dimitrov is a former strategy consultant with a professional focus on business and intangible assets valuation. His professional background lies in solving complex business problems through the lens of overall business strategy and various valuation and financial modelling techniques.

Vladimir has also been exploring the concept of value investing and in particular finding companies with sustainable competitive advantages that also trade below their intrinsic value. He supplements his bottom-up approach with a more holistic view of the markets through factor investing techniques.

Vladimir made his first investment in farmland right out of high school in 2007 and consequently started investing through mutual funds at the bottom of the market in 2009. In the years that followed he has been focused on developing his own investment philosophy and has been managing a concentrated equity portfolio since 2016. Vladimir is LSE Alumni and a CFA charterholder . 

All of Vladimir's content published on Seeking Alpha is for informational purposes only and should not be construed as investment advice. Always consult a licensed investment professional before making investment decisions.

Disclosure: I/we have a beneficial long position in the shares of ORCL, GM either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Please do your own due diligence and consult with your financial advisor, if you have one, before making any investment decisions. The author is not acting in an investment adviser capacity. The author's opinions expressed herein address only select aspects of potential investment in securities of the companies mentioned and cannot be a substitute for comprehensive investment analysis. The author recommends that potential and existing investors conduct thorough investment research of their own, including a detailed review of the companies' SEC filings. Any opinions or estimates constitute the author's best judgment as of the date of publication and are subject to change without notice.

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