FISV Fiserv
Shrinking, over-levered processor; the price assumes stabilization, with little margin for further margin erosion.
The story
Fiserv is a scaled payments and core-banking processor. Its moats are sticky bank-core contracts and the Clover merchant ecosystem. The business is mature and has turned down: TTM revenue of 20.87B is below the prior year's 21.19B, and operating margin has slid from about 27% to 23% as Clover growth slows and pricing pressure bites. Net debt of 26B, more than the equity value, amplifies the downside.
The facts changed, so I moved Y1 growth from 4.5% to 1%: TTM revenue is now shrinking. Operating margin fell from 27.3% to 23.2%, so I cut the target margin from 26% to 24%, a modest recovery rather than a return to the peak. Sales-to-capital drops to 0.5 to match TTM efficiency of 0.4 and heavy acquired capital. Beta and failure probability tick up for leverage, and the horizon shortens to 6 years because this is a mature business.
Value drivers
| Revenue growth (Y1) | 1.0% |
| Terminal growth | 2.5% |
| Forecast horizon | 6y |
| Target operating margin | 24.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.50 |
| Beta | 1.10 |
| Failure probability | 6.0% |
| Cost of capital (WACC) | 8.7% |
| Terminal WACC | 8.5% |
Valuation bridge
| PV of explicit FCFF | 15.72B |
| PV of terminal value | 32.69B |
| Equity value | 20.82B |
| ÷ shares → per share | $39.14 |
News
neutral +0.15 · 8 articles
- Fiserv (FISV), Why Is It Back In The Spotlight?
- Fiserv (FISV) Lands Canadian Venue Deal As Legal Leadership Shifts
- FISV Stock Climbs Overnight After 7-Day Red Streak: Canada’s Winnipeg Blue Bombers Selects Clover For Game-Day Commerce
- Pentair nabs ex-Fiserv CFO for finance chief
- FISV Stock Plunges To 52-Week Low: Why Is Retail Still Bullish?
- PNC Financial Reaffirms Outlook as Loans, Fees and AI Investments Gain Momentum
- 1 Profitable Stock Worth Your Attention and 2 Facing Challenges
- Fiserv Targets Turnaround With Project Elevate, AI and Clover Growth
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 21.07B | 1.0% | 23.4% | 3.99B | 417.32M | 3.57B | 3.29B |
| 2 | 21.35B | 1.3% | 23.5% | 4.07B | 547.94M | 3.52B | 2.98B |
| 3 | 21.69B | 1.6% | 23.7% | 4.16B | 683.16M | 3.48B | 2.70B |
| 4 | 22.10B | 1.9% | 23.8% | 4.27B | 824.23M | 3.44B | 2.46B |
| 5 | 22.59B | 2.2% | 24.0% | 4.39B | 972.50M | 3.42B | 2.25B |
| 6 | 23.15B | 2.5% | 24.0% | 4.50B | 1.13B | 3.37B | 2.04B |
Key risks
- Clover growth stalls and merchant pricing erodes further
- Leverage of 26B net debt against a 24B market cap limits flexibility if margins keep falling
- Management turnover (CFO and legal leadership) signals execution and guidance credibility issues
Catalysts
- Evidence that margins have stabilized near 24% with a return to positive organic growth
- Debt paydown or asset sales that reduce equity risk