Why Heartland Payment Systems (HPY) Stock Is Soaring Today

NEW YORK (TheStreet) -- Shares of Heartland Payment Systems Inc. (HPY) are higher by 7.78% to $48.93 on Wednesday afternoon, following the company's announcement it's acquiring TouchNet Information Systems Inc. for $375 million. 

Heartland is a offers customers bankcard payment processing services and TouchNet is a privately held integrated commerce solutions provider to higher-education institutions.

The company expects the transaction to be "slightly accretive in 2014", and add at least 30 cents per share in 2015.

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Heartland said the deal will expand its growth profile and make the company the largest provider of integrated commerce solutions to the higher-education market.

Separately, TheStreet Ratings team rates HEARTLAND PAYMENT SYSTEMS as a Buy with a ratings score of A. TheStreet Ratings Team has this to say about their recommendation:

"We rate HEARTLAND PAYMENT SYSTEMS (HPY) 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, good cash flow from operations, growth in earnings per share, increase in stock price during the past year and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 12.2%. Since the same quarter one year prior, revenues slightly increased by 4.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • Net operating cash flow has significantly increased by 984.06% to $15.21 million when compared to the same quarter last year. In addition, HEARTLAND PAYMENT SYSTEMS has also vastly surpassed the industry average cash flow growth rate of -3.20%.
  • HEARTLAND PAYMENT SYSTEMS's earnings per share improvement from the most recent quarter was slightly positive. 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, HEARTLAND PAYMENT SYSTEMS increased its bottom line by earning $1.98 versus $1.61 in the prior year. This year, the market expects an improvement in earnings ($2.40 versus $1.98).
  • The stock has risen over the past year as investors have generally rewarded the company for its earnings growth and other positive factors like the ones we have cited in this report. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.
  • The debt-to-equity ratio is somewhat low, currently at 0.73, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Despite the fact that HPY's debt-to-equity ratio is low, the quick ratio, which is currently 0.67, displays a potential problem in covering short-term cash needs.
  • You can view the full analysis from the report here: HPY Ratings Report
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