12. Fidelity National Information Services, Inc. (NYSE:FIS)
Short % of Shares Outstanding: 1.91%
Number of Hedge Fund Holders: 59
Forward Price to Earnings Ratio as of August 28: 15.90
Fidelity National Information Services, Inc. (NYSE:FIS) operates in the financial technology industry more commonly known as the Fintech industry. It provides a range of technologies for financial institutions and businesses to enhance their digital transformation. It operates through three main segments including Banking Solutions, Capital Market Solutions, and Corporate and Other Solutions.
The Banking Solutions segment provides complete banking systems and related applications including mobile and online banking platforms. Whereas, the Capital Market Solution provides trading and asset management tools that facilitate lending and loan syndication services.
Fidelity National Information Services, Inc. (NYSE:FIS) has remained profitable over the past decade, however, the growth has remained in the single digits. Over the past 10 years, its revenue has grown by 5% and net income by 3%. Therefore, management has sensed the urgency to reposition the company to a more sustainable growth trajectory.
To accomplish this, the company is now focusing on higher-value software-based solutions that meet clients’ needs while providing Fidelity National Information Services, Inc. (NYSE:FIS) a multiyear recurring revenue. As a result, during fiscal 2023, the company reduced its cost by more than $550 million and expects a total cost saving of $1 billion by 2024. Leveraging, its recurring revenue management was also able to exceed its 2023 free cash flow target by more than $500 million.
Investors believe that the company’s client-centric approach topped with its brand recognition offers significant room for growth. It was held by 59 hedge funds during Q2 2024, with stakes amounting to $2.36 billion. Lyrical Asset Management is the top share holder of the company with a position worth $326.46 million.
Fidelity National Information Services, Inc. (NYSE:FIS) is undervalued at current levels and has proven its profitability in its most recent quarter results. It is trading at 16 times its forward earnings. Its earnings are expected to grow by 51% during the year to reach $5.1.
During the fiscal second quarter of 2024, the cost-saving efforts and a better revenue mix continued to deliver growth for the company. Its adjusted revenue grew 4% year-over-year to reach $2.5 billion delivering EBITDA margins of 40.1%, up 110 base points from the previous year.
Management has improved its full-year guidance after gaining some confidence from its cost-saving efforts. It now expects revenue between $10.12 – $10.17 billion, with adjusted EBITDA margins at 40.7%, indicating a modest increase from the previous year.
Invesco Growth and Income Fund stated the following regarding Fidelity National Information Services, Inc. (NYSE:FIS) in its Q2 2024 investor letter:
“Given that many equity indexes reached record highs, valuation opportunities were limited and portfolio activity was somewhat muted. We purchased new holdings in financials, health care and IT. Fidelity National Information Services, Inc. (NYSE:FIS): The company is a leading global provider of financial services technology solutions for financial institutions, businesses and developers. The company has lagged its peers in recent years due to numerous acquisitions that increased its debt. However, a new CEO and CFO have made efforts to right size the firm and refocus on its core banking and capital market businesses by selling a partial stake in a recent acquisition. As a result, we believe the company should be able to increase selling opportunities, grow earnings and potentially return capital to shareholders.”
