Stock Analysis on Net

Fidelity National Information Services Inc. (NYSE:FIS)

Dividend Discount Model (DDM)

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Intrinsic Stock Value (Valuation Summary)

Fidelity National Information Services Inc., dividends per share (DPS) forecast

US$

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Year Value DPSt or Terminal value (TVt) Calculation Present value at 9.82%
0 DPS01 1.40
1 DPS1 1.35 = 1.40 × (1 + -3.32%) 1.23
2 DPS2 1.35 = 1.35 × (1 + -0.35%) 1.12
3 DPS3 1.38 = 1.35 × (1 + 2.61%) 1.04
4 DPS4 1.46 = 1.38 × (1 + 5.57%) 1.00
5 DPS5 1.59 = 1.46 × (1 + 8.54%) 0.99
5 Terminal value (TV5) 133.71 = 1.59 × (1 + 8.54%) ÷ (9.82%8.54%) 83.70
Intrinsic value of Fidelity National Information Services Inc. common stock (per share) $89.09
Current share price $118.04

Based on: 10-K (reporting date: 2020-12-31).

1 DPS0 = Sum of the last year dividends per share of Fidelity National Information Services Inc. common stock. See details »

Disclaimer!
Valuation is based on standard assumptions. There may exist specific factors relevant to stock value and omitted here. In such a case, the real stock value may differ significantly form the estimated. If you want to use the estimated intrinsic stock value in investment decision making process, do so at your own risk.


Required Rate of Return (r)

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Assumptions
Rate of return on LT Treasury Composite1 RF 2.13%
Expected rate of return on market portfolio2 E(RM) 11.52%
Systematic risk of Fidelity National Information Services Inc. common stock βFIS 0.82
 
Required rate of return on Fidelity National Information Services Inc. common stock3 rFIS 9.82%

1 Unweighted average of bid yields on all outstanding fixed-coupon U.S. Treasury bonds neither due or callable in less than 10 years (risk-free rate of return proxy).

2 See details »

3 rFIS = RF + βFIS [E(RM) – RF]
= 2.13% + 0.82 [11.52%2.13%]
= 9.82%


Dividend Growth Rate (g)

Dividend growth rate (g) implied by PRAT model

Fidelity National Information Services Inc., PRAT model

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Average Dec 31, 2020 Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016
Selected Financial Data (US$ in millions)
Cash dividends declared and other distributions 873  658  422  385  342 
Net earnings attributable to FIS common stockholders 158  298  846  1,319  568 
Revenue 12,552  10,333  8,423  9,123  9,241 
Total assets 83,842  83,806  23,770  24,517  26,031 
Total FIS stockholders’ equity 49,300  49,440  10,215  10,835  9,741 
Financial Ratios
Retention rate1 -4.53 -1.21 0.50 0.71 0.40
Profit margin2 1.26% 2.88% 10.04% 14.46% 6.15%
Asset turnover3 0.15 0.12 0.35 0.37 0.35
Financial leverage4 1.70 1.70 2.33 2.26 2.67
Averages
Retention rate -0.83
Profit margin 6.96%
Asset turnover 0.27
Financial leverage 2.13
 
Dividend growth rate (g)5 -3.32%

Based on: 10-K (reporting date: 2020-12-31), 10-K (reporting date: 2019-12-31), 10-K (reporting date: 2018-12-31), 10-K (reporting date: 2017-12-31), 10-K (reporting date: 2016-12-31).

2020 Calculations

1 Retention rate = (Net earnings attributable to FIS common stockholders – Cash dividends declared and other distributions) ÷ Net earnings attributable to FIS common stockholders
= (158873) ÷ 158
= -4.53

2 Profit margin = 100 × Net earnings attributable to FIS common stockholders ÷ Revenue
= 100 × 158 ÷ 12,552
= 1.26%

3 Asset turnover = Revenue ÷ Total assets
= 12,552 ÷ 83,842
= 0.15

4 Financial leverage = Total assets ÷ Total FIS stockholders’ equity
= 83,842 ÷ 49,300
= 1.70

5 g = Retention rate × Profit margin × Asset turnover × Financial leverage
= -0.83 × 6.96% × 0.27 × 2.13
= -3.32%


Dividend growth rate (g) implied by Gordon growth model

g = 100 × (P0 × rD0) ÷ (P0 + D0)
= 100 × ($118.04 × 9.82%$1.40) ÷ ($118.04 + $1.40)
= 8.54%

where:
P0 = current price of share of Fidelity National Information Services Inc. common stock
D0 = the last year dividends per share of Fidelity National Information Services Inc. common stock
r = required rate of return on Fidelity National Information Services Inc. common stock


Dividend growth rate (g) forecast

Fidelity National Information Services Inc., H-model

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Year Value gt
1 g1 -3.32%
2 g2 -0.35%
3 g3 2.61%
4 g4 5.57%
5 and thereafter g5 8.54%

where:
g1 is implied by PRAT model
g5 is implied by Gordon growth model
g2, g3 and g4 are calculated using linear interpoltion between g1 and g5

Calculations

g2 = g1 + (g5g1) × (2 – 1) ÷ (5 – 1)
= -3.32% + (8.54%-3.32%) × (2 – 1) ÷ (5 – 1)
= -0.35%

g3 = g1 + (g5g1) × (3 – 1) ÷ (5 – 1)
= -3.32% + (8.54%-3.32%) × (3 – 1) ÷ (5 – 1)
= 2.61%

g4 = g1 + (g5g1) × (4 – 1) ÷ (5 – 1)
= -3.32% + (8.54%-3.32%) × (4 – 1) ÷ (5 – 1)
= 5.57%