Cloud-computing stocks are hot because of the remote work boom coronavirus created. Unfortunately, most cloud-computing companies such as Cloudflare (NYSE: NET) lose money.
Cloudflare; for example, reported a -$21.25 million quarterly operating income on 30 September 2020. In contrast, Fiserv Inc. (NASDAQ: FISV) reported a quarterly operating income of $542 million on the same day.
Fiserv (FISV); which provides financial-services Internet-of-Things (IOT) solutions makes money. For instance, Fiserv reported quarterly revenues of $3.786 billion and a quarterly gross profit of $1.918 billion on 30 September 2020.
Fiserv can deliver high-levels of growth and make money
Additionally, Stockrow estimates Fiserv (NASDAQ: FISV) offers growth in the form of a 21.04% revenue growth rate for the quarter ending on 30 September 2020.
Fiserv’s revenue growth rate fell from 129.17% in the quarter ending on 30 June 2020 and 150.93% in the quarter ending on March 2020. Stockrow began 2020 with a quarterly revenue growth rate of 160.80% on 31 December 2020.
Thus, Fiserv can deliver high-levels of growth and make money. I think that makes Fiserv an outlier in the cloud-computing universe.
Fiserv generates cash
Fiserv (FISV) can generate cash from its operations. For example, Fiserv reported a quarterly operating cash flow of $1.042 billion on 30 September 2020.
Impressively, Fiserv reported a quarterly operating cash flow of close to $1 billion in each quarter of 2020. Fiserv began 2020 with a quarterly operating cash flow of $1.178 billion on 31 December 2019. The quarterly operating cash flow fell to $888 million on 31 March 2020 and rose to $1.031 billion on 30 June 2020.
However, Fiserv reported a quarterly ending cash flow of $44 million on 30 September 2020. The quarterly ending cash flow rose from -$27 million on 30 June 2020.
Fiserv’s Debt
Sadly, Fiserv is paying off $7.768 billion it borrowed in the quarter ending on September 30, 2019. To explain, Fiserv reported a quarterly financing cash flow of $7.768 billion on that date.
Since then, Fiserv has been paying off around $1 billion in obligations a quarter. Fiserv reported a -$1.160 billion quarterly financing cash flow on 31 December 2020. The quarterly financing cash flow fell to -$1.134 billion on 31 March 2020, -$825 million on 30 June 2020 and -$826 million on 30 September 2020.
Overall, Fiserv had $20.894 billion in long-term debts and total liabilities of $39.943 billion on 30 September 2020. Thus, I consider Fiserv a risky company because it has accumulated enormous amounts of debt.
What Value does Fiserv have?
Fiserv (NASDAQ: FISV) offers enormous value in the form of $72.732 billion in total assets on 30 September 2020. The total assets fell from $77.093 billion on 30 June 2020 and $77.539 billion on 31 December 2019.
Consequently, FISV could be a high-value company. One important attribute of Fiserv is its ability to raise enormous amounts of cash from financing. I think the ability to raise cash from financing adds value to Fiserv.
More importantly, I consider Fiserv a cloud-computing and internet of things (IOT) company that makes money. In particular, I think Fiserv has an operating IOT infrastructure that could be capable of enormous growth in the future.
How Fiserv makes money from the Internet of Things
Most of today’s internet of things (IOT) is theoretical. Aitheon, for example, wants to operate robots, drones, businesses, and vehicles through its blockchain platform.
Fiserv (FISV), in contrast, operates on an existing internet of things. To example, Fiserv provides software payment solutions for gas pumps, automatic teller machines (ATMs), point-of-sale (POS) systems, and cash registers.
Importantly, Fiserv has platforms that connect existing devices through networks that function now. For instance, Fiserv’s Omaha or Optis issuer processing platform provides credit and debit card processing services in North America. Fiserv claims Optis supports 1.1 billion accounts and 26 of the top 50 credit issuers in the United States.
How Fiserv uses the IOT
Similarly, Fiserv’s Carat platform provides omnichannel channel commerce solutions for devices such as gas pumps.
In particular, Carat connects Alphabet’s (GOOGL) Google Pay app with ExxonMobil gas pumps. Hence, ExxonMobil (XOM) customers can buy fuel with their Google Pay apps.
Carat allows ExxonMobil customers to pay with either a quick-read (QR) code or an NFC wireless payment. To explain, QR Code initiates payment by scanning by bar code while Near Field Communications (NFC) connects a pay app to a payment platform through a wireless signal.
Thus, Fiserv has IOT solutions work with existing networks rather than theoretical technologies such as Blockchain. Consequently, Fiserv is a company with cloud software that operates on an existing internet of things. Fiserv offers the technology that integrates the cloud with the IOT.
Is Fiserv a good Stock?
I think Fiserv (FISV) is a good stock because it Mr. Market reasonably prices it, plus the company makes money, and retains value.
Mr. Market paid $113.86 for Fiserv shares on 31 December 2020. That price is slightly lower than the $115.47 Mr. Market paid for Fiserv on 30 December 2019.
I think Fiserv is not overpriced, which gives it far-less risk than most cloud-computing stocks. To elaborate, I think investors will not lose most of the money they use to buy Fiserv shares. In addition, I think Fiserv has a low margin of safety because it generates significant amounts of cash.
Unfortunately, Fiserv does not pay a dividend, so I do not consider it a good income stock. However, I think Fiserv is a good growth stock.
I believe Fiserv offers enormous growth potential with a low level risk. Thus, I consider Fiserv an interesting growth stock that is worth investigating.
Originally published at https://marketmadhouse.com on December 31, 2020.
