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FLEETCOR Technologies: Near Record Low Valuation For This Compounder That Benefits From Higher Inflation

Apr. 04, 2022 4:19 PM ETFLEETCOR Technologies, Inc. (FLT)MA, V, WEX9 Comments


  • FLEETCOR is a high quality business expense automation company, with 42% of revenue from gas cards and 20% from their accounts payable business.
  • Both directly benefit from higher inflation and gasoline prices. Even a transition to electric vehicles likely is a net benefit to the company.
  • FLEETCOR appears likely to beat EPS guidance again this year, and remarkably trades at a near record low valuation at only 16x 2022 earnings.
  • Given their 15-20% EPS growth forecasts, we peg a fair value of FLT at 17-19x 2023 earnings, which puts the stock up 30-70% in a year or three.
  • Downside appears ~10-15% given the huge margin of safety on the stock currently.  There is recession risk, but that appears partly priced in as well.
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Cheerful man with blank card on gas station

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This article was written by

Thomas Lott profile picture

Thomas Lott started as a portfolio manager at a hedge fund in 2003 and has worked as a financial professional for over 30 years. Thomas espouses Graham and Dodd/Buffett style investing, always on the lookout for high-quality equities at attractive valuations. He is a graduate of Vanderbilt University with an MBA from Northwestern's Kellogg School of Management.

Thomas leads the investing group Cash Flow Compounders where, along with NJ Value Investor, he aim to find the best companies in the world that are trading at attractive valuations. Features of Learn more include: their exclusive portfolio of compounders, 2-4 in-depth new ideas a month, live chat, and direct access for questions. Learn more.

Analyst’s Disclosure: I/we have a beneficial long position in the shares of FLT 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.

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Comments (9)

So why is this stock rolling over so hard?
1) recession is going to hurt most of their businesses
2) all of their debt is floating, so the are getting blasted by higher interest expense.

OK, Number 2, I have no idea about. I said that to get a response. I saw that some of their debt it floating and guidance assumed a LIBOR range. Did they enter into swaps? have they made their floating fixed? If so, how much of it?

If it is still floating... they probably will get blasted by interest expense
Thomas Lott profile picture
Remarkable Q2 earnings. Stock is down just as the market has sold off. Beat and raise quarter. Amazing it is down, EPS is now guided to be 70c higher in 2022 compared to original guidance set forth earlier this year. They grew revenue organically 17% in Q2, 15% in Q1. Guidance assumes 4.46 fuel prices in the back half per gallon. I get $15.93 in EPS this year using $4.30 in gas prices where they are today. This is typically an 18x stock. In 2023, if anyone even looks out more than a quarter (we do), then just using 16x and 17.68 in EPS (a bit below the Street), and we get a $283 stock, up almost 30%. At an average multiple 18x =318 per share. A great compounder, at record low valuation. Ron Clarke is solid/smart and as good as they come in our view.
@Thomas Lott I'm curious as to your thoughts following the latest earnings. Seemed like results and guidance were better than expected, but shares down a lot more than the overall market Friday. This does not seem like the type of stock to have a whisper number way out of line with analyst estimates, so what gives? Am I missing something that the market particularly disliked?
Thomas Lott profile picture
@smartOrLucky Certainly the market has been acting pretty irrationally lately. They posted record organic, double digit growth in all segments and raised guidance. Excellent management team. The call went well. The only negative I can think of was that FLT estimated 77c of EPS from Ukraine/Russia this year, which is 4.9% of earnings that could go away. We estimated 50c above was essentially what management had been guiding to before. The offset of high retail gasoline prices is still over 50c though, so we are talking a net 27c in lower EPS. The sell off appears pretty unjustified, as they will still end up 15-15.50 in EPS ex Eastern Europe, which is inline with old guidance. I suspect in 2025 we’ll be very happy owning this high quality name growing EPS 15-20% a year.
@Thomas Lott thanks! I'll also note as a bullish indicator that this article only has 6 comments despite what I'm assuming is a pretty big following for you on SA. Seems nobody's irrationally exuberant about this particular stock at least.
You may be right. Just at 15.8x EBITDA, it is way too pricey. I might nibble on some dips.
@Thomas Lott great article. I think the market is concerned that on the AP side they are facing increasing competition from startups and newly listed players like Bill.com.
But I think you're right, Clarke is very commercial and ultimately he will not lose, and will likely win. Great risk/reward here.
I didn't look but was the FCC suit a concern? Was it settled? The claim, I think, was FleetCorp misrepresented savings and customers were hit with fees that more then cancelled out any savings incurred.
If memory serves right
Thomas Lott profile picture
@Jim Uechi It’s not settled yet, but the underlying billing mistakes have long been fixed. A deal/fine and resolution would definitely help the stock.
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