You Still Have More to Gain From Total Systems Services (TSS)

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We all look for solid growth in a company, and the one I want to talk to you about today is a nice fit for the current market environment. It consistently produces steady earnings growth, has committed itself to returning cash to shareholders — approximately 85% of free cash flow to be exact — and has traded extremely well so far this year.

TSS Has Growth Worth GraspingI see more to come for this stock. So, let’s dive in!

Total Systems Services (TSS) is a global payments solution provider that services financial and nonfinancial institutions. TSS supports a payment transaction nearly 49 million times a day and is divided into four categories: Issuing Services, Acquiring Services, Prepaid Services and Merchant Solutions.

TSS’ goal is to stay in step with game-changing technologies, and Total Systems Services announced last September that it will support transactions forApple‘s (AAPL) Apple Pay.

TSS is also involved in the Big Analytics phenomenon. Last November, management signed an agreement with predictive analytics and software company Fair Isaac Corporation (FICO) to provide it with TSS’s targeted messaging to enhance cardholder communication and increase engagement. This targeted messaging is part of a series of analytics offerings Total Systems Services intends to introduce this year.

I like that Total Systems has a very solid earnings history, with sales and earnings per share moving higher each year since 2010. Last year was a very strong year for TSS, and management gave encouraging guidance for 2015.

Revenues before reimbursable items increased a little over 20.3% to $2.19 billion thanks to 5.2% organic growth and having a full year of NetSpend — one of the country’s leading providers of reloadable prepaid cards — following its mid-2013 acquisition.

Growth was good for both North American (+10.9%) and International Services (+6.3%), reflecting double-digit increases in transactions for both segments offset by lower selling prices.

Strong results continued in TSS’ most recent first-quarter report. Earnings of 52 cents per share easily beat expectations for just 46 cents per share; revenue jumped 12% to $662 million, which was about $20 million ahead of consensus.

And take a look at the chart below, which shows just how well TSS stock has performed in 2015, gaining 20% year-to-date:

TSS_June4

As you can see, TSS stock’s momentum has slowed recently due to overall market action as well as a sell-side analyst report that expressed concerns with industry competitiveness.

I don’t believe this is the end of the run for TSS. We’re up nicely in my GameChangers service since we bought TSS three months ago, and I believe we’ll continue to see consistent growth in the longer term.

The market continues to pay a premium to stocks that return capital in the low interest rate environment we’re currently in, and this, along with Total System Services’ solid operating momentum, should help TSS stock perform well for the rest of 2015.

Hilary Kramer is the editor of GameChangers, Breakout Stocks Under $10, High Octane Trader,Absolute Capital Return and Value Authority. She is an accomplished investment specialist and market strategist with more than 25 years of experience in portfolio management, equity research, trading, and risk management. She has extensive expertise in global financial management, asset allocation, investment banking and private equity ventures, and is regularly sought after to provide her analysis on Bloomberg, CNBC, Fox Business Network, and other media.

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