VeriFone Systems: Reasons to Buy

VeriFone Systems (PAY) is a provider of digital payment solutions, and given the pace at which digital payments are growing, I think that it is a stock to stay invested in for the long run. The good thing is that VeriFone is already making good use of the prospects in the end market as its recent quarterly results show us. Let’s take a look.

A strong third quarter

VeriFone’s third-quarter results were strong. The company saw a 7% increase in net revenue to $510 million from $476 million in the same quarter last year.

Gross margin increased 7% to $213 million from $198 million, driven by an increase in system solutions. In addition, operating income increased 14% to $72 million from $63 million for the same quarter last year.

The good thing is that VeriFone is seeing growth across different geographies. For instance, in North America, VeriFone’s revenue grew 61% year-over-year. Meanwhile, the EMEA segment with six European markets delivered double-digit constant currency growth. On the other hand, Latin America is driving services growth and new global gateway in Mexico.

Due to its growth in the different end markets, VeriFone has an attractive valuation. The company has a trailing P/E ratio of 47.56 and a forward P/E ratio of 13.51. This clearly indicates that VeriFone’s earnings are slated to grow impressively going forward. In addition, VeriFone has improved its liquidity situation as its current ratio has increased to 1.66 from last year’s current ratio of 1.53.

Tackling the competition

In order to maintain its competitive edge VeriFone is taking a number of measures. For example, VeriFone and Aava Mobile have entered into a partnership wherein they will be offering the first handheld mobile point of sale solution powered by Intel to deliver a flexible, long EMV-ready mPOS solution for enterprise retailers.

Further, VeriFone will also be “among the first to enable clients to accept rewards and loyalty information in addition to NFC payments at the terminal via Apple Pay.” Looking forward, the Westpac Group including St. George, Bank of Melbourne and Bank SA, “will provide the VX 690 payment terminal from VeriFone along with full terminal management support through VeriFone’s Payment as a Service platform.”

Hence, VeriFone is taking smart steps by collaborating with technology and payment providers as this will allow it to capture a broader market in the long run.


VeriFone’s third quarter performance was outstanding. The company delivered an increase in net revenue, operating income, and net income as compared to the prior-year period. As a result, its earnings also increased in the double digits. Further, the forward P/E ratio is much lower as compared to the trailing P/E ratio, which is another positive for the company.

Moreover, looking ahead, VeriFone expects net revenue of $510 million to $513 million for the fourth quarter. Also, the net income per diluted share is expected to be between $0.47 and $0.48. Both these numbers are above last year’s quarter, which means that VeriFone will continue delivering steady growth going forward.

Published on Sep 19, 2015
By Ayush Singh

Copyrighted 2020. Content published with author's permission.

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