Hook & thesis
Global Payments (GPN) just put the pieces in place for a re-rating: management raised 2026 adjusted EPS guidance to $13.80-$14.00 and authorized a $2.5 billion buyback (with a $550 million accelerated repurchase). The market reacted — shares jumped and volume spiked — but beneath the headline move the company still looks deeply undervalued on both cash-flow and forward-earnings metrics. If the company executes on its cash returns and Issuer Solutions cadence, this is a high-expected-value long with multi-bagger upside if sentiment normalizes and multiples expand.
This is a structured trade: enter near the post-announcement level, use a disciplined stop under prior support, and hold with a long-term time horizon tied to execution on buybacks, organic growth in Issuer Solutions, and margin recovery across Merchant Solutions.
What the company does and why it matters
Global Payments is a payments technology and software solutions provider operating two primary segments: Merchant Solutions (processing and software for SMBs, mid-market and select enterprise customers) and Issuer Solutions (commerce solutions supporting issuers). Payments remain a secular growth market - digital payments, subscription billing, and software-enabled merchant services continue to migrate from legacy rails into platform players that can monetize software, data and recurring services.
GPN straddles land-grab opportunity (scale SMB merchant acquiring and payments software) and high-margin software/issuer revenue. The stock should matter to investors because the company generates meaningful free cash flow and is now directing capital aggressively back to shareholders, which short-circuits some of the valuation drag from the prior multi-year selloff.
Key fundamentals and why the valuation looks attractive
Pick the most compelling numbers:
- Market capitalization: $22.33 billion.
- Free cash flow: $2.866 billion. That implies an approximate FCF yield of ~12.8% against market cap (FCF / market cap).
- Trailing P/E and book multiples: trailing P/E around 9.8 and price-to-book under 1 (P/B ~0.73).
- Enterprise metrics: EV/EBITDA ~8.76 - consistent with a company trading at a material discount to software and payments peers.
- Balance sheet: debt-to-equity ~0.71, a levered but manageable capital structure for a cash-generative business.
The real kicker is management’s 2026 adjusted EPS guide of $13.80-$14.00 (announced 02/18/2026) and the Q4 2025 adjusted EPS print of $3.18. If the mid-point of guidance holds, the stock’s forward P/E is below 6 at current prices. Put differently, the combination of: (a) a low current multiple, (b) a high FCF yield, and (c) an aggressive buyback program, makes multiple expansion the most likely driver of material upside from here.
Technical & market context
Technicals support a constructive base: the 50-day simple moving average is near $76.28 while the RSI sits in neutral-to-favorable territory (about 61.8). Short interest metrics show persistent interest from short sellers (settlement short interest around ~9.9 million shares with days-to-cover roughly 3), and recent short-volume data indicates heavy participation in intraday selling — a setup that can amplify upside on positive news or sustained buybacks.
Valuation framing
At roughly $22.33 billion market cap and $2.866 billion in free cash flow, the company is trading at a valuation that implies a very high cash return relative to price. A simple re-rating exercise: if GPN were to trade at a conservative P/E of 15 on management’s 2026 EPS midpoint (~$13.90), the implied equity value would be about $208 per share (13.9 * 15 = 208.5). A P/E of 20 would imply a price around $278. That’s the algebra behind the "multi-bagger" argument — the upside comes from normalization of multiples, not a miraculous jump in revenue assumptions.
Note the current dividend yield (~1.43%) adds a small floor to returns while buybacks remove shares and should lift per-share metrics if executed at current prices.
| Metric | Value |
|---|---|
| Market cap | $22.33B |
| Free cash flow | $2.866B |
| Trailing P/E | ~9.8 |
| Forward EPS guidance (2026) | $13.80 - $14.00 |
| EV/EBITDA | ~8.8 |
| P/B | ~0.73 |
Catalysts
- Execution on the $2.5B buyback and the $550M accelerated repurchase - direct support for EPS and stock price via shrinking float.
- Delivering 2026 adjusted EPS in the guided range will force upward revision of forward multiples and remove a major uncertainty premium.
- Stronger Issuer Solutions traction or accretive tuck-in deals could accelerate higher-margin recurring revenue growth.
- Macro tailwinds for digital payments and merchant services (e-commerce and subscription billing adoption) that increase payments volumes.
- Sentiment shift across the payments group: peers de-levering or showing growth stability could lead to multiple re-rating for GPN.
Trade plan (actionable)
Direction: Long
Entry: $79.74 (current post-announcement level)
Stop loss: $66.00
Target: $220.00
Horizon: long term (180 trading days). I expect the trade to play out over multiple quarters as buybacks reduce float, management executes on guidance, and the market re-prices the company toward a higher EPS multiple. This horizon gives time for both fundamental execution and sentiment re-rating to compound the upside.
Why these parameters? Entry at the recent post-announcement level captures the market’s immediate reaction while still leaving room for upside as buybacks and EPS delivery materialize. The stop at $66.00 sits below the recent 52-week low area and below obvious support, keeping risk defined. The $220 target assumes material multiple expansion in combination with the guidance; it is aggressive but grounded in the forward EPS math described above.
Risks and counterarguments
- Execution risk: Management could miss its 2026 adjusted EPS range. Misses would likely drive a rapid reversion to lower multiples and wipe out upside.
- Macro/volume risk: Payments revenue is correlated with consumer spending and merchant activity. A slowdown in transaction volumes would pressure merchant services and margins.
- Liquidity & leverage: The current ratio is low (~0.63), indicating limited short-term liquidity cushion. While debt-to-equity (~0.71) is reasonable, a shock to cash flow could weaken financial flexibility.
- Valuation re-pricing in the wrong direction: The stock is cheap for a reason; if investors decide to value the business more conservatively long-term (e.g., lower recurring revenue growth), the multiple could compress further.
- Shareholder return execution risk: Buybacks are powerful only if executed at prices that add value. If management accelerates repurchases but then needs to pivot capital away for acquisitions or to shore up the balance sheet, the expected EPS accretion could be reduced.
Counterargument: A reasonable opposing view is that the market’s low multiple already prices in structural growth concerns in merchant acquiring and competitive pressure on take rates. If underlying revenue growth disappoints and the Issuer Solutions transition lags, even generous buybacks may not be enough to move the stock much higher. In that scenario the sensible investor would demand proof of sustainable revenue improvement before increasing exposure.
What would change my mind
I would reassess the trade if: (a) management retracts or materially reduces buyback authorization, (b) the company guides materially below the $13.80-$14.00 2026 range, or (c) payments volumes deteriorate month-after-month in a way that meaningfully reduces FCF generation. Conversely, sustained execution that produces repeatable EPS beats and visible margin leverage would validate upgrading the target and adding to the position.
Conclusion
Global Payments is a classic cash-flow-rich company that temporarily traded at distressed valuations. Management’s guidance and buyback authorization create a clear path for multiple expansion; if executed, the market could re-rate GPN sharply higher. The trade is not without risk — execution and macro sensitivity are real — but a disciplined entry at $79.74 with a defined stop at $66.00 and a long-term horizon gives an asymmetric risk/reward profile that fits a high-conviction value-turned-growth re-rating idea.
Key trade facts
- Entry: $79.74
- Stop: $66.00
- Target: $220.00
- Horizon: long term (180 trading days)
- Risk level: high