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.

Investopedia Broker Guides: Enhance your trading with the tools from today's top online brokers.

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.

SEE: Do-It-Yourself Analyst Predictions

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.

Related Articles
  1. Stock Analysis

    3 Resilient Oil Stocks for a Down Market

    Stuck on oil? Take a look at these six stocks—three that present risk vs. three that offer some resiliency.
  2. Economics

    Keep an Eye on These Emerging Economies

    Emerging markets have been hammered lately, but these three countries (and their large and young populations) are worth monitoring.
  3. Stock Analysis

    Is Pepsi (PEP) Still a Safe Bet?

    PepsiCo has long been known as one of the most resilient stocks throughout the broader market. Is this still the case today?
  4. Investing

    Has Apple Finally Hit the Wall With the iPhone?

    We look at how the iPhone has sold over its brief existence and what that means for the future of the smartphone market.
  5. Investing

    The ABCs of Bond ETF Distributions

    How do bond exchange traded fund (ETF) distributions work? It’s a question I get a lot. First, let’s explain what we mean by distributions.
  6. Investing

    The Top Businesses Nurtured By Y Combinator

    We look at the top startups that were incubated at Y Combinator, one of the world's most popular business incubator firms.
  7. Investing

    Is It Time To Bet On The iPad Again?

    Apple's focus on iPad has been fairly tepid these past few years. But, the iPad Pro was the centerpiece of the company's latest product announcements. Why?
  8. Stock Analysis

    3 Stocks that Are Top Bets for Retirement

    These three stocks are resilient, fundamentally sound and also pay generous dividends.
  9. Investing News

    Are Stocks Cheap Now? Nope. And Here's Why

    Are stocks cheap right now? Be wary of those who are telling you what you want to hear. Here's why.
  10. Investing News

    4 Value Stocks Worth Your Immediate Attention

    Here are four stocks that offer good value and will likely outperform the majority of stocks throughout the broader market over the next several years.
  1. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  2. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  3. Why would a corporation issue convertible bonds?

    A convertible bond represents a hybrid security that has bond and equity features; this type of bond allows the conversion ... Read Full Answer >>
  4. How does additional paid in capital affect retained earnings?

    Both additional paid-in capital and retained earnings are entries under the shareholders' equity section of a company's balance ... Read Full Answer >>
  5. What types of capital are not considered share capital?

    The money a business uses to fund operations or growth is called capital, and there are a number of capital sources available. ... Read Full Answer >>
  6. What is the difference between issued share capital and subscribed share capital?

    The difference between subscribed share capital and issued share capital is the former relates to the amount of stock for ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!