NEW YORK (TheStreet) -- Shares of Total System Services (TSS) are down 0.38% to $31.60 after Sterne Agee initiated coverage on the company, which processes merchant acquirers and issues bank credit cards, with a "neutral" rating and a $32 price target due to conflicts in both international and prepaid merchant processing.
"While account growth in the North American segment has improved, and the risk of client attrition appears to have subsided, other cross currents have emerged in merchant processing, international, and prepaid that are keeping us on the sidelines," said analyst Thomas C. McCrohan.
The firm's $32 price target would suggest a potential upside of 0.57% from the stocks previous close.
TheStreet Ratings team rates TOTAL SYSTEM SERVICES INC as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate TOTAL SYSTEM SERVICES INC (TSS) 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 robust revenue growth, largely solid financial position with reasonable debt levels by most measures, compelling growth in net income, growth in earnings per share and expanding profit margins. We feel these strengths outweigh the fact that the company shows weak operating cash flow."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth greatly exceeded the industry average of 12.3%. Since the same quarter one year prior, revenues rose by 30.4%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
- The debt-to-equity ratio is somewhat low, currently at 0.90, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. To add to this, TSS has a quick ratio of 1.65, which demonstrates the ability of the company to cover short-term liquidity needs.
- The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the IT Services industry. The net income increased by 90.4% when compared to the same quarter one year prior, rising from $57.72 million to $109.90 million.
- TOTAL SYSTEM SERVICES INC's earnings per share improvement from the most recent quarter was slightly positive. Stable earnings per share over the past year indicate the company has sound management over its earnings and share float. We anticipate these figures will begin to experience more growth in the coming year. During the past fiscal year, TOTAL SYSTEM SERVICES INC's EPS of $1.29 remained unchanged from the prior years' EPS of $1.29. This year, the market expects an improvement in earnings ($1.92 versus $1.29).
- 40.95% is the gross profit margin for TOTAL SYSTEM SERVICES INC which we consider to be strong. Regardless of TSS's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, the net profit margin of 18.25% trails the industry average.
- You can view the full analysis from the report here: TSS Ratings Report
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