Verifone Systems, Inc. - Momentum

Verifone Systems, Inc. (PAY) continues to trade near its all-time high at $41.47 after reporting another great quarter in early December that included a 10% earnings surprise. With the company showing strong gains both domestically and internationally and a bullish growth projection, this Zacks #2 rank stock is a solid addition to the momentum team.

We got an update on Verifone's business on Dec 2 when the company reported excellent Q4 results that once again beat expectations.

Fourth-Quarter Results

Revenue for the period was up 27% from last year to $276 million. Earnings also came in strong at 33 cents, 10% ahead of the Zacks Consensus Estimate, where the company now has an average earnings surprise of 11% over the last four quarters.

Verifone also saw its gross margin expand to 40% as it continues to manage its costs and expenses.

The company was involved in a couple of deals during the quarter, buying industry competitor HyperComm for $265 million that will help it expand in international markets. Verifone also inked a deal with leading online payment service provider PayPal to create a mobile payment solution.

Strong Cash Position

With cash and equivalents of $465 million against $474 million in debt, Verifone has a strong financial profile.

Estimates

We saw some pretty solid movement in estimates off the good quarter, with the current year up 10 cents to $1.47 while the next year added 3 cents to $1.72, a bullish 17% growth projection.

Valuation

In light of recent gains, PAY trades at a premium to its peers, with a forward P/E of 27X against the industry average of 23X.

2-Year Chart

On the chart, PAY has been strong for the last year, recently hitting a new multi-year high at $41.47 on the good quarter. But in spite of the gains, the stochastic below the chart says shares are trading safely away from over-bought territory. Look for support from the trend line on any weakness, take a look below.

Read the Sep PAY article here

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Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
 
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