Worldpay (NYSE:WP) stock is in the financial world’s transaction services sector. And it has been there a very long time under various forms.
Basically, transactions servicing is moving money from consumers to merchants or to banks, or any combination of those transactions. It may be easier to think of what Visa (NYSE:V) does — it’s the middleman in transactions, assuring a safe and accurate movement from one account to another.
The key difference between what WP and V do is, Worldpay it doesn’t have a consumer facing business. It focuses more on working among financial institutions and merchants.
As the world becomes more digital, and we start to transition to the first phase of a cashless society, these payment processing firms are starting to gain global traction.
You see, the move to e-commerce is in the interest of financial institutions, merchants (especially large, multinational ones) and even governments. E-commerce provides a digital trail that can be followed from one account to another.
That means banks don’t have to deal with counting, storing and moving bulky cash. For merchants, they don’t have to count it, deposit it and leave some sitting around for various payouts to vendors, etc.
This is why businesses and financial institutions love the concept of cashless. It makes transactions and account transfers frictionless.
The History of WP Stock
And this is what payment processors like WP do. They allow these payments to flow with as little friction as possible while keeping everything organized, secure and transparent. Originally a spinoff from regional financial institution Fifth Third Bancorp (NASDAQ:FITB) around 1990 to help it expand its ATM business, it continued to find opportunities in the growing transaction services sector.
In 2011, that spinoff became Vantiv and was listed on the New York Stock Exchange in 2012.
Since then, like most of the big players in this sector, it has been on a buying spree, snapping up smaller firms in the sector. This has been the strategy for growth since it’s cheaper (for now) to buy a small firm in a particular sector or region than it is to try to compete and establish your own brand.
By 2017, Vantiv was one of the Forbes 2017 Fast Tech 25 as one of the fastest growing tech firms in the U.S.
It’s no surprise then, that at the same time Vantiv had been in and out of talks with the UK’s largest payment processing company, Worldpay. In late 2017 they cut a deal.
Vantiv bought Worldpay for $10.4 billion. And after all was said and done, Vantiv took the name Worldpay and now covers 146 countries, 126 transaction currencies and 300 alternative payment forms, and processes 40 billion transactions a year.
And the thing is, WP stock’s market cap is about one tenth the size of V and Mastercard. That makes it a very interesting growth stock in a high-growth sector for the next five years or more.
And at some point, it may even be a merger target of one of the big financial institutions looking to get into the space.
Louis Navellier is a renowned growth investor. He is the editor of four investing newsletters: Growth Investor, Breakthrough Stocks, Accelerated Profits and Platinum Growth. His most popular service, Growth Investor, has a track record of beating the market 3:1 over the last 14 years. He uses a combination of quantitative and fundamental analysis to identify market-beating stocks. Mr. Navellier has made his proven formula accessible to investors via his free, online stock rating tool, PortfolioGrader.com. Louis Navellier may hold some of the aforementioned securities in one or more of his newsletters.