4 Financial transaction services stocks to rise despite inflation – January 3, 2022

The financial transaction services industry is well positioned for growth driven by the rise of digital payments, increasing transaction volumes, a diverse range of products and solutions, and increasing consumer spending. Consumer confidence has gradually improved with an increasing number of people vaccinated and a booming business outlook. In fact, according to the University of Michigan, the Consumer Confidence Index stood at 70.6 in December, higher than the November 2021 reading of 67.4. Stable consumer spending is directly proportional to the growth in income of companies in the payments industry. According to published reports, individuals also expect more jobs in the coming months as the economy rebounds despite the new Omicron variant. Persistent inflation is a further woe in the United States, which reached 6.8% in November 2021, the highest since June 1982.

Despite such headwinds, leading companies like Visa inc. (V Free report), American Express Company (AXP Free report), Fiserv inc. (FISV Free report) and Global Payments Inc. (GPN Free Report) are about to benefit.

In addition, experts’ forecasts of the current economic situation and their expectations have improved. More and more Americans are spending on vacations and entertainment, which gives space to life. Plus, businesses continue to profit from surging vacation sales. Per Mastercard SpendingPulse, holiday non-auto retail sales are up 8.5% this holiday season while online sales are up 11%, both year-on-year.

Industry Description

Zacks’ financial transaction services industry is part of the financial technology or FinTech space, which includes several companies of a diverse nature. The industry includes card and payment processors, ATM service providers, card payment solution providers, money transfer service providers, and providers of investment solutions and financial advisor services. . Players in this segment leverage their unique and proprietary global payments network that connects issuers and acquirers around the world to facilitate transaction switching, enabling account holders to use their products at millions of acceptance points across the globe. the world. Money transactions are carried out through these networks, providing a convenient, fast and secure method of payment in multiple currencies around the world.

4 Financial Transaction Services Industry Trends That Are Likely To Rule 2022

Digital payments to boost the payments space, leverage e-commerce: E-commerce and digital payments are now the new normal. People invariably stick with the online payment option because of the flexibility and options it offers. It is no longer just a way to contain the spread of the virus. The increased adoption of e-commerce bodes well for the financial transaction services industry as they are present at different nodal points of the entire payments ecosystem, making online transactions successful. According to MarketsandMarkets, the global digital payment market is expected to experience a CAGR of 15.2% over the period 2021-2026.

Cryptocurrency: The financial transaction services space is seeing an increase in demand for cryptocurrency. So, more and more companies are investing in the same. There was a time when this digital currency was not widely accepted, but recently there has been a remarkable change in the perception of investors regarding crypto products. With cash and checks taking a back seat, flexible payment options, such as cryptocurrency, have taken center stage. Leading players like Visa and Mastercard are making the most of this opportunity and taking steps to include crypto products in their portfolios.
Earlier this month, Visa unveiled Global Crypto Advisory Practice to help clients and partners make financial decisions regarding crypto products. Investor optimism over cryptocurrency, the alternative payment method unaffected by the pandemic, also predicts that it may soon become a common investment option.

Substantial technological investments: The payment space is undergoing a substantial change with the adoption of technological advancements. It invests in mobile and in-app payment technologies as well as in new authentication technologies such as biometrics. Companies are constantly investing in AI to help detect and prevent fraud. Advances in these areas should continue to improve risk management tools and solutions and prevent disappointments across the payments ecosystem, making it more agile and hassle-free. Technology is also being deployed to make real-time payment services available everywhere. According to MarketsandMarkets, the real-time payments market is expected to reach $ 25.9 billion by 2023.

Consolidation: Mergers and acquisitions are rife in the payments industry as players attempt to expand their scale to capture greater market share. Companies in this space are taking initiatives to explore capabilities beyond their individual niches and diversify their product offerings. This is important to strengthen its presence in the market and having a varied portfolio leads to better income. This, in turn, is likely to improve margins in the future.

Zacks’ ranking in industry indicates poor outlook

Zacks’ financial transaction services industry is housed within the larger Zacks business services industry. It carries a Zacks Industry Rank # 172, which places it in the bottom 32% of the 252 Zacks industries.

The group’s Zacks Industry Rank, which is essentially the average of the Zacks Rank of all member stocks, indicates a short-term bearish outlook. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s positioning in the lowest 32% of industries ranked by Zacks is the result of a negative outlook for earnings per share for all of the constituent companies.

Before we feature a few stocks that you might still want to consider for your portfolio, let’s take a look at the industry’s recent stock market performance and where it stands on valuation.

Industry surpasses the sector but lags behind the S&P 500

The financial transaction services industry has outperformed Zacks’ broader business services industry, but has lagged the Zacks S&P 500 composite over the past year.

The industry was down 20.7% during this period compared to the 29.5% gain in the Zacks S&P 500 Composite Index. However, the broader sector lost 34.4%.

One-year price performance

Current industry assessment

Comparing with the Zacks S&P 500 Composite Index based on the 12 month forward price / earnings ratio, which is a commonly used multiple for the industry, we find that the industry ratio of 41.26X is higher. at the 23.81 of the S&P 500. X but lower than the 45.43X of the sector.

Over the past five years, the industry has traded as low as 32.2X, as low as 20.87X and at the median of 25X.

Price / earnings ratio (F12M)

Price / earnings ratio (F12M)

Financial transaction service stocks to watch closely

We present four stocks that currently carry a Zacks Rank # 3 (Hold) and are well positioned for short term growth. You can see The full list of Zacks # 1 Rank (Strong Buy) stocks today here.

VisaThe many acquisitions and partnerships of have paved the way for long term growth and have consistently driven revenues. Technology upgrades bode well for V. The shift from payments to digital modes is also a boon. The acquisition of Visa Europe is also a strategic adjustment. V has been striving to integrate blockchain technology into its payment platform for some time.

The presence of a trusted payment facilitator like Visa, which has more than 25 digital currency wallets linked to its systems, further propels the use of cryptocurrencies and digital currencies.

A solid balance sheet makes it possible to invest in the company.

Zacks’ consensus estimate for the 2022 EPS growth rate is set at 18.78%. Visa has beaten profits in each of the past four quarters, averaging 9.81%. Over the past year, Visa shares have lost 0.5%.

Price and consensus: V

American Express Company, an integrated global payments player headquartered in New York, will continue to benefit from a number of favorable winds. AXP continues to launch innovative card offerings and upgrade existing ones to meet the evolving needs of its members. In addition, AXP takes many initiatives focused on technological advances, the introduction of secure digital solutions and assistance to companies to regulate payments. Strong cash flow is a tailwind.

AXP’s profits have beaten estimates over the past four quarters, averaging 35.38%. AXP shares have gained 38.6% in one year.

Price and consensus: AXP

Based in Brookfield, WI, Fiserv enjoys a dominant position in the financial and payment solutions industry thanks to a large and diverse customer base and continuous technological upgrades. FISV’s diverse product portfolio helps attract a constant flow of customers. Acquisitions make it possible to expand its product portfolio, improve its offerings, increase its market share and expand its customer base.

FISV’s net income has beaten estimates in each of the past four quarters, averaging 3.15%. FISV shares have lost 7.3% in one year.

Price and consensus: FISV

Global payments provides payment technologies and software solutions to customers around the world. It also enables financial institutions and other financial service providers to manage their card portfolios, reduce technical complexity and overhead, and provide a seamless experience for cardholders on a single platform.

Investments in future growth, a number of acquisitions and strong cash flow bode well for the long term.

GPN’s profits have beaten estimates in each of the past four quarters, averaging 3.58%. GPN shares have lost 34.8% in one year.

Price and consensus: GPN

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