Fiserv (FI): Margin Gains Stand Out as Growth Slows, Undervaluation Narrative Reinforced

Fiserv (FI) reported average annual earnings growth of 25.4% over the past five years, with net profit margins rising to 17%, compared to last year's 15.2%. Earnings climbed 17.8% over the past year, but that is below the longer-term trend, and market expectations are now for 7.2% annual earnings growth going forward.

See our full analysis for Fiserv.

Next, we will see how those numbers match up to the narratives investors and analysts have been following, and where the latest results might shift the story.

See what the community is saying about Fiserv

Profit Margins Set to Widen Further

• Analysts forecast Fiserv's profit margins to climb from 16.0% today to a robust 24.0% within three years, implying a notable margin expansion ahead even as revenue growth expectations modestly trail the market average.
• Analysts' consensus view anticipates that product innovation and international growth initiatives, such as the expansion of Clover and new partnerships in markets including Brazil and Canada, will drive this improvement in margins and profitability.
  • This is supported by efforts to scale high-margin value-added services and software-based offerings within Fiserv's client base.
  • However, some caution remains, as execution delays in platform rollouts or increased competition could prevent the expected margin expansion from fully materializing.

What could make or break whether Fiserv's earnings hit their targets? Get the full analyst debate in the consensus narrative. 📊 Read the full Fiserv Consensus Narrative.

Quality Valuation Discount Versus Peers

• Fiserv's Price-to-Earnings ratio is just 9.8x, significantly lower than both the industry average of 14.8x and peer average of 14.6x, suggesting its shares are trading at a steep discount despite high-quality earnings.
• According to analysts' consensus view, this discount is striking because the $65.19 share price is well below both the DCF fair value of $147.95 and the analyst target of $115.48.
  • Consensus attributes the gap to moderating growth expectations, but underscores that Fiserv's steady profit margins and recurring revenue make it stand out among payment technology companies.
  • The relatively stable risk profile, with no material new risks flagged, may make such a valuation gap less justified over the long term.

Share Count Decline Supports EPS Growth

• Analysts expect a 4.45% annual decline in shares outstanding over the next three years, which could provide an important boost to future earnings per share even if overall profit growth slows.
• Consensus narrative highlights that, by reducing share count while growing total earnings, Fiserv can drive EPS toward the projected $12.43 by 2028
  • This increases the likelihood of meeting or beating price target estimates, since higher EPS at modest growth rates can still fuel valuation upside.
  • However, if organic revenue growth remains at the low end of guidance, the positive impact from buybacks alone may not fully satisfy investors seeking broad-based expansion.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Fiserv on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Fiserv research is our analysis highlighting 4 key rewards and 2 important warning signs that could impact your investment decision.

See What Else Is Out There

While Fiserv’s future earnings growth is expected to slow and may lag behind industry leaders, organic revenue expansion could remain below expectations, which presents a risk of underperformance.

If steady performance matters to you, use our stable growth stocks screener (2108 results) to focus on companies delivering consistent earnings and revenue growth through changing market cycles.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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