I am on the plane coming home from Atlanta. I just finished up a quick jump across the country training a new client. Atlanta was great this time around, not a lot of time to look around and take in some of the good food to be had in this town but the weather was nice and the hotel was fine.
My client was Global Payments, a mid-cap publicly traded company what does electronic payment processing. We did two days of training for their emerging leaders program. One great thing they did was to have a financial professional at each of the tables in the class. This really helps when the finance experts facilitate and add to the class conversation. This was very much the case with this group.
During the session we got to hear from the director of investor relations, the CEO, and the President and COO. It was great to see these executives getting involved and supporting our training. We had two days of great finance weather.
The group discussed a lot of topics during the two days. One of the goals that Global Payments has right now is trying to grow large enough to become a Fortune 500 company. Right now at $2.5 billion in revenue they sit in the 800’s in the top 1,000. To hit the Fortune 500 they will need to get to about $5 billion. To do that Global Payments is trying to grow organically as well as growing through acquisition. This strategy can be a challenge. The company is currently expanding into new domestic markets and also growing internationally. The management team seems well aligned on that goal. It will be interesting to see how they progress. I hope to be able to continue a long-term relationship with this group.
An interesting metric that Global uses is a number called non-GAAP Cash Earnings per Share. This metric is an interesting combination of cash flow and earnings per share. They calculate it by taking net income and adjusting each line of the statement to a more cash based number. They leave depreciation in the expenses but take out acquisition related amortization. This leaves an EPS number that is indicative of the real cash the business is generating per share. It is better than EBITDA per share because it takes into account the fact that depreciation needs to be replaced in a healthy business and therefore represents a future hit to cash. On the other hand acquisition amortization does not need to be replaced and should be taken out to get a better feel of how earnings convert to cash.
By reviewing the earrings press releases and talking to the finance experts in the room, it is clear that this non GAAP metric is accepted by Wall Street investors. In the past two years Global Payments stock had doubled in value. Their P.E. Ratio is hovering in the mid to upper 20’s, a clear sign from Wall Street that this company is one to watch.