Fools Gold? Global Payments (GPN) Stock Hits New 52-Week High
NEW YORK (TheStreet) -- The chart of Global Payments (GPN) - Get Report is still pointed up and prices just made a new 52-week high, but the rate of the advance is slowing and traders need to pay closer attention.
When you look at this chart of GPN, above, you say "this looks great," but the rate of increase in prices is slowing and that can foreshadow a correction. Prices are rising while the On-Balance-Volume line and moving averages are heading in the right direction.
The bottom panel shows the momentum or rate of change of prices. The rally in November has been at a slower pace than the October advance. This bearish divergence (higher highs in price but with lower highs from the indicator) is an early warning sign that there could be a price reversal ahead. The divergence can continue to be a "yellow light" and prices might not decline, but I believe it is always better to beware of a potential change rather than being surprised by one.
What to do from here? First, continue to watch GPN for any other signs of weakness. Second, consider raising your sell-stop protection.
TheStreet Ratings team rates GLOBAL PAYMENTS INC as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:
We rate GLOBAL PAYMENTS INC (GPN) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its revenue growth, solid stock price performance, impressive record of earnings per share growth, good cash flow from operations and expanding profit margins. We feel its strengths outweigh the fact that the company has had generally high debt management risk by most measures that we evaluated.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 27.0%. Since the same quarter one year prior, revenues slightly increased by 6.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
- Investors have apparently begun to recognize positive factors similar to those we have mentioned in this report, including earnings growth. This has helped drive up the company's shares by a sharp 63.51% over the past year, a rise that has exceeded that of the S&P 500 Index. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
- GLOBAL PAYMENTS INC has improved earnings per share by 20.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. We feel that this trend should continue. During the past fiscal year, GLOBAL PAYMENTS INC increased its bottom line by earning $2.06 versus $1.69 in the prior year. This year, the market expects an improvement in earnings ($2.96 versus $2.06).
- Net operating cash flow has significantly increased by 908.83% to $513.39 million when compared to the same quarter last year. In addition, GLOBAL PAYMENTS INC has also vastly surpassed the industry average cash flow growth rate of -11.39%.
- The gross profit margin for GLOBAL PAYMENTS INC is rather high; currently it is at 68.49%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 11.57% trails the industry average.
- You can view the full analysis from the report here: GPN
Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of Jim Cramer, TheStreet or any of its contributors.