Global Payments Inc (GPN), Automatic Data Processing (ADP): The Best American Business Services Provider

Global Payments Inc (NYSE:GPN) had the lowest ROE among its rivals, although it was higher than the overall industry due to the costs associated with the processing system intrusion and, to a lesser extent, the effect of U.S. ISO business. During the year, the company identified and self-reported unauthorized access into a limited portion of the North America card processing system. As a result of this event, certain card brands removed the company from their list of PCI DSS compliant service providers.

Comparative valuation

The weighted average value of the stock symbolizes its calculated fair value. For computing the weighted average value of the stocks with the multiples-based approach employed, more weight is assigned to the multiples that give a better picture of the economic reality of the company. The industry standard is also taken into account.

Compared to the current market price of each stock, Global Payments Inc (NYSE:GPN) and Fiserv, Inc. (NASDAQ:FISV) appear to be undervalued relative to the market, whilst Automatic Data Processing (NASDAQ:ADP) is relatively overvalued. Based on current market statistics, Global Payments Inc (NYSE:GPN) has a positive potential of 25.52% and Fiserv, Inc. (NASDAQ:FISV) is projected to give a return of 10.07% whereas Automatic Data Processing (NASDAQ:ADP) is projected to report negative returns of 17.22%.

Future prospects

On the grounds of the above analysis, Global Payments seems to provide the maximum return on investment. However, my opinion differs; I support the purchase of Fiserv, due to the positive figures the company has shown in all areas, though the company’s growth and margins were lower in preceding years. Nonetheless, Fiserv continues to improve its bottom-line results. In the light of future growth prospects, and the comparable valuation performed, I would advise going long on Fiserv in order to earn a positive portfolio return.

Awais Iqbal has no position in any stocks mentioned. The Motley Fool recommends Automatic Data Processing. Awais is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

The article The Best American Business Services Provider originally appeared on Fool.com is written by Awais Iqbal.

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