FleetCor Technologies To Continue Recovery?

by Trefis Team
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After nearly a 3% fall this year, at the current price near $279 per share, we believe FleetCor Technologies stock (NYSE: FLT) can continue its price rise. FleetCor Technologies, which provides fuel cards and workforce payment products and services, has seen its stock fall from $288 to $279 since the start of the year compared to the S&P 500 which has increased almost 10% in 2020. Earnings have improved continuously for the last 3 quarters (quarter on quarter) and revenue has also improved quarter on quarter for Q3 2020 as the sales performance returned to 80% of prior period levels. The company is progressing toward a first quarter 2021 closing of the AFEX cross border acquisition announced in September.

The company has seen growth in revenue over recent years, while its P/E multiple has increased. We believe the stock is likely to continue growing in the near term. Our dashboard Buy Or Sell FleetCor Technologies Stock? provides the key numbers behind our thinking.

The 50% rise in FLT stock price between 2018 to now is justified by growth in earnings and P/E multiple. FleetCor Technologies’ revenue increased 9% from $2.4 billion in 2018 to $2.6 billion in 2019. This effect was amplified by margins increasing from 33.3% to 33.8% during this period. On a per share basis, earnings went up from $9.14 to $10.36.

During the same period, the P/E multiple increased from 20x to 28x. The P/E fell in 2020 as the company saw the effects of the pandemic on the first two quarters. Currently the multiple stands at 27x.

Where Is The Stock Headed?

The global spread of coronavirus led to lockdown in various cities across the globe, which affected industrial and economic activity. This is likely to adversely affect consumption and consumer spending. FleetCor Technologies’ revenues took a hit for the first three quarters of 2020 as they recorded revenue of $1.77 billion down 8% y-o-y. The company reported earnings of $5.87 for the first nine months of 2020 compared to $7.64 for the same period in 2019. In Q3 2020 the company has seen good recovery as they returned new sales performance to 80% of the prior period level and are also working on active acquisition opportunities in and around the Corporate Payments space in addition to the AFEX cross border acquisition announced in September.

The actual recovery and its timing hinge on the broader containment of the coronavirus spread. Our dashboard Trends In U.S. Covid-19 Cases provides an overview of how the pandemic has been spreading in the U.S. and contrasts with trends in Brazil and Russia. Following the Fed stimulus — which set a floor on fear — the market has been willing to “look through” the current weak period and take a longer-term view. With investors focusing their attention on 2021 results, the valuations become important in finding value. Though market sentiment can be fickle, and evidence of an uptick in new cases could spook investors once again.

What if you’re looking for a more balanced portfolio instead? Here’s a high quality portfolio to beat the market, with over 100% return since 2016, versus 55% for the S&P 500. Comprised of companies with strong revenue growth, healthy profits, lots of cash, and low risk, it has outperformed the broader market year after year, consistently.

 

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