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I came across Total System Services (TSS) today while scanning the lists of top % gainers. TSS is having a reasonably nice day trading as I write at $22.30/share up $.99 or 4.65% on the day. According to the "Snapshot" on money.cnn.com, TSS "...through its wholly owned subsidiaries, provides credit, debit commercial and private-label card processing services."
Taking a look at the latest quarterly report, which was the fourth quarter 2003 results which were announced on January 20, 2003, we find that revenue for the latest quarter ended December 31, 2003, increased 13.1% to $278.3 million from $246.0 million last year. Net income was up 11.2% to $39.4 million from $35.5 million the prior year and diluted earnings/share jumped 10.9% to $.20/share from $.18/share.
Checking the "5-Yr Restated" financials on Morningstar.com, we find that revenues have grown steadily from $0.6 billion in 1998, to $1.0 billion in the trailing twelve months. Earnings/share have also grown each and every year from $.28/share to $.69/share in the latest twelve months. Interestingly, in addition, the company DOES pay a small dividend which has been increasing from $.04/share in 1998 to $.08/share in the trailing twelve months.
Free cash flow, while erratic, has been consistently positive. $62 million in 2000, $3 million in 2001, $116 millin in 2002 and $47 million in the trailing twelve months.
Balance sheet-wise, TSS has $55.6 million in cash and $170.9 million in other current assets, plenty to cover both the $123.7 million in current liabilities and the $92.2 million in long-term liabilities combined.
Checking some "Key Statistics" on Yahoo.com, we find that this is a large cap company with a market cap of $4.39 Billion. The trailing p/e is a bit rich at 31.16, with forward p/e (fye 31-Dec-05) is still at 25.91. The PEG is at 1.86...so this is not a screaming bargain, and the price/sales is a bit rich as well at 3.98.
There are 196.82 million shares outstanding, and ONLY 31.0 million of them float. Currently there are 3.67 million shares out short, which is a bit steep considering only 31 million that float so this represents 11.85% of the float, or 7.12 trading days. This is probably bullish for this stock...as that is a large # of shares that need to be covered. Any steep rise in price might lead to a squeeze imho.
As I mentioned earlier, TSS does pay a small dividend of $.08/share yielding 0.38%. Nothing to write home about, but an increasing dividend, as TSS reports, is a very nice feature that may add some price appreciation and stabilization to this issue. The last stock split was a 3:2 in May, 1998.
Looking at a Point and Figure Chart on TSS, we can see that this stock has been trading essentially sideways since 2000 with a rise in 2001, followed by a drop down to about $11.5 where it had support. In late 2003, TSS broke through its resistance level at about $17.00/share and has been trading higher since. That is my simplified read on this chart!
Overall, TSS is an interesting, if not cheap selection. They have nice free cash flow, steady growth in revenue and earnings, and a clean balance sheet. The valuation isn't that great as we are not the first to apparently discover this issue, but the consistency is very attractive. The large short posiition may lead to increased buying in the short term. I do not own any shares of this stock myself.
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Regards to all!