Why Total System (TSS) Deserves A Place In Your Portfolio

The stock of Total System Services, Inc. (NYSE:TSS) appears attractive given the strong show the company put up in the first half of 2017 that also prompted analysts to revise their estimates upward. The company’s strong business volumes, accretive acquisitions and product diversification are anticipated to yield positive results for the stock.

Reflecting analysts’ optimism about the company’s prospects, the Zacks Consensus Estimate for 2017 and 2018 has moved up 1.5% and 2.3%, respectively, over the last 30 days.

Further, shares of this Zacks Rank #2 (Buy) company have gained around 56%, year to date, outperforming 39.7% growth recorded by the industry it belongs to.

But these are not the only reasons why Total System is appealing to investors.

So, What Makes Total System a Must Buy?

Increase in Earnings Guidance: Following second-quarter results, the company raised its full-year revenue and earnings per share guidance for the second time this year. It now expects total revenues of $4.809 billion to $4.889 billion, reflecting an increase of 15% to 17% over 2016 and net revenues in the range of $3.315 billion to $3.395 billion, up 9% to 12% from 2016. GAAP earnings per share (EPS) are projected at $2.30–$2.38, up 33% to 37% from 2016, and adjusted EPS is guided at $3.22 to $3.30, reflecting an increase of 15% to 18% year over year.

Top Line Growth: Total System continues to perform strongly as evident by increasing revenues since 2010 (CAGR of 14.2%) and the trend continued in the first half of 2017 (total revenue up 27.5% year over year). Also, the company’s projected total revenues for 2017 points to growth of 15% to 17% over 2016, indicating constant momentum in revenues.

Earnings Growth: Total System witnessed a CAGR of 18.5% from 2011-2016 and the momentum continued in the first half of 2017, with earnings per share increasing 20.7%. In addition, the company’s 2017 adjusted EPS is guided at $3.22 to $3.30, reflecting an increase of 15% to 18% year over year.

Financial Strength: The company has a strong track of cash flows. In the first half of 2017, free cash flow increased 30.3% year over year. For 2017, the company expects free cash flow in the $600 million to $630 million range, up from the previous guidance of $580–$610 million. The company also remains committed to enhance shareholders’ value through share buybacks and dividend payouts. The company’s strong free cash flow and deleveraging progress have supported a 30% increase in its quarterly dividend.

Stock Undervalued: Total System has one-year forward P/E ratio of 20.7 compared with the 25.3 for the industry, which makes to stock undervalued.

Other Stocks to Consider

Green Dot Corporation (NYSE:GDOT) has been witnessing upward estimate revisions for the last 30 days. In one year, the company’s share price has been up more than 99%. It also flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Vantiv Inc. (NYSE:VNTV) has been witnessing upward estimate revisions for the last 30 days. Further, the stock has surged nearly 35.1% over the past year. It currently carries a Zacks Rank #2.

Western Union Co. (NYSE:WU) has been recording upward estimate revisions for the last 30 days. It beat estimates in two of the last four quarters, with an average positive surprise of 4%. It currently holds a Zacks Rank #2.

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