In a recent company presentation, electronic payment processor Global Payments (NYSE:GPN) pointed out that the market for card-based payments is growing 13% annually. Consumers across the globe continue to shift from paying cash to using credit cards and related electronic payments, such as through PayPal online. There are a number of ways to invest in the growth, with Global Payments a compelling option, provided a recent data breach doesn't turn out to be too serious. If it doesn't, the downswing in the shares represents a buying opportunity.

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Recent Developments
Back in April, Global Payments announced that around 1.5 million card numbers may have been stolen from its system. Along with the numbers, it indicated that Track 2 card data may also have been stolen, but not cardholder names, addresses or social security numbers. The company hasn't provided an update since its third quarter earnings call but did indicate Visa (NYSE:V) removed Global from its approved vendor list. Other press reports indicated other vendors may have also removed it from approved lists, though at this time it could not be confirmed if MasterCard (NYSE:MA) or American Express (NYSE:AXP) had made any decisions about their future relationship with Global. Back in 2008, rival Heartland Payment Systems (NYSE:HPY) saw a breach with 130 million cards compromised, but didn't see any long-term decline in its business.

Outlook and Valuation
Analysts expect solid sales growth for 2012 of 17.5% and total sales of almost $2.2 billion. Growth is projected to moderate to 9.3% for total sales of about $2.4 billion by the end of 2013. Profits should hit $3.52 per share and advance nearly 10% to $3.86 in 2013. At the current share price of roughly $40.49, the forward P/E currently stands at 10.49.

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The Bottom Line
Weak stock market sentiment and the data breach have combined to send Global Payment's share price to the lower end of the trading range over the past year. European economic woes are also not helping and the region accounted for nearly 20% of Global's sales last year.

Overall though, the company remains an appealing play on the rapid growth of card-based payments. Investors are extremely bullish on industry growth and have chosen to primarily invest in Visa and MasterCard to gain exposure. However, their valuations have grown high. MasterCard trades at a forward P/E of nearly 16, as does Visa. And investing in American Express means exposure to potential bad debts as it extends credit to its customers.

At the low double-digit P/E, any downside risk from fallout from the data breach looks price into to Global Payment's valuation. There is also considerable upside potential. Over the past five years, the company has grown both annual sales and earnings in the double-digits. Given the strong industry trends, similar growth trends could persist well into the future.

At the time of writing, Ryan C. Fuhrmann did not own shares in any of the companies mentioned in this article.



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Tickers in this Article: GPN, MA, V, AXP, HPY

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