Fidelity National Information Services Inc. (NYSE:FIS)

The valuation multiples exhibit significant volatility and a general trend of contraction over the analyzed five-year period, with distinct patterns emerging between earnings-based and asset-based ratios.

Earnings and Profit Multiples

The Price to Earnings (P/E) and Price to Operating Profit (P/OP) ratios demonstrate a similar pattern of extreme expansion followed by a sharp correction. The P/E ratio rose from 40.89 in 2018 to a peak of 527.80 in 2020 before receding to 134.86 in 2021. Similarly, the P/OP ratio increased from 23.73 in 2018 to 151.07 in 2020, followed by a reduction to 53.30 in 2021.

Revenue Multiples

The Price to Sales (P/S) ratio reached a peak of 9.35 in 2019. Following this high, a consistent downward trend is observed, with the ratio declining to 6.64 in 2020, 4.05 in 2021, and reaching a period low of 2.63 by December 31, 2022.

Book Value Multiples

The Price to Book Value (P/BV) ratio experienced a sustained decline from 3.39 in 2018 to a low of 1.19 in 2021. A marginal reversal of this trend occurred in 2022, where the ratio increased slightly to 1.40.

The company experienced a period of significant volatility in both market valuation and profitability between 2018 and 2022. While the share price peaked in 2019, the corresponding earnings per share declined sharply, leading to an expansion of the price-to-earnings multiple to unsustainable levels before the metric became inapplicable due to negative earnings.

Share Price Performance

The stock price reached a peak of 156.78 US$ in 2019, followed by a consistent downward trajectory over the subsequent three years, ending at 64.52 US$ by December 31, 2022. This represents a significant reduction in market value from its 2019 high.

Earnings Per Share (EPS) Trends

Earnings exhibited a severe contraction, falling from 2.62 US$ in 2018 to 0.25 US$ in 2020. Although a modest recovery occurred in 2021 with EPS rising to 0.68 US$, the 2022 fiscal year resulted in a substantial net loss, with EPS dropping to -28.25 US$.

Price-to-Earnings (P/E) Ratio Analysis

The P/E ratio underwent extreme inflation, rising from 40.89 in 2018 to a peak of 527.80 in 2020. This surge was primarily driven by the rapid collapse of earnings relative to the share price. By 2022, the P/E ratio became undefined as the company transitioned to negative earnings, reflecting a total decoupling of the price multiple from positive profitability.

The financial performance and market valuation between 2018 and 2022 exhibit a period of significant volatility, characterized by a decoupling of share price from operating profitability followed by a sharp deterioration in both metrics.

Share Price Trajectory

The share price experienced an initial surge, rising from 107.12 US$ in 2018 to a peak of 156.78 US$ in 2019. Following this peak, a consistent three-year decline was observed, with the price falling to 134.26 US$ in 2020, 92.25 US$ in 2021, and reaching a period low of 64.52 US$ by the end of 2022.

Operating Profit per Share Trends

Operating profitability showed a marked decline during the early part of the period, dropping from 4.52 US$ in 2018 to 0.89 US$ by 2020. A brief recovery occurred in 2021, with profit per share increasing to 1.73 US$, before a severe collapse in 2022, which resulted in a substantial operating loss of 27.23 US$ per share.

Price to Operating Profit (P/OP) Analysis

The P/OP ratio expanded rapidly from 23.73 in 2018 to a peak of 151.07 in 2020, indicating that the market valuation remained high despite a significant contraction in operating profits. This ratio corrected to 53.30 in 2021 as the share price declined more sharply than the operating profit recovered. For the period ending December 31, 2022, the ratio is not applicable due to the transition to negative operating profit.

Between 2018 and 2022, a significant divergence is observed between the company's operational revenue performance and its market valuation. While sales per share demonstrated a consistent recovery and growth trend following a dip in 2019, the share price experienced a sustained decline, leading to a substantial compression of the valuation multiple.

Share Price Trajectory

The share price peaked in 2019 at US$ 156.78, followed by a continuous year-over-year decrease. By December 31, 2022, the price had fallen to US$ 64.52, representing a significant reduction in market value from its 2019 high.

Sales per Share Evolution

After a notable decline to US$ 16.77 in 2019, sales per share entered a period of steady growth. The metric increased to US$ 20.21 in 2020, US$ 22.76 in 2021, and reached US$ 24.54 by the end of 2022, indicating an improvement in the revenue generated per share over the latter half of the period.

Price-to-Sales (P/S) Ratio Analysis

The P/S ratio reached a peak of 9.35 in 2019, coinciding with the peak share price. Subsequently, the ratio declined sharply to 6.64 in 2020, 4.05 in 2021, and finally to 2.63 in 2022. This downward trend reflects a contraction in the valuation multiple, where the market's willingness to pay for each dollar of sales diminished even as the underlying sales per share improved.

An analysis of the valuation metrics from 2018 to 2022 reveals a significant compression in the Price to Book Value (P/BV) ratio, reflecting a shift in market sentiment and changes in the underlying net asset value.

Price to Book Value (P/BV) Trend

A consistent downward trajectory is observed in the P/BV ratio from 2018 to 2021, falling from a high of 3.39 to a low of 1.19. This indicates that the market premium attributed to the company's book value diminished substantially over this period. A slight reversal occurred in 2022, with the ratio increasing to 1.40.

Share Price Volatility

The share price experienced a peak of 156.78 US$ in 2019 before entering a period of sustained decline. By December 31, 2022, the price reached 64.52 US$, representing a significant reduction in market capitalization relative to the 2019 peak.

Book Value Per Share (BVPS) Fluctuations

The book value per share saw a sharp increase between 2018 and 2019, rising from 31.63 US$ to 80.22 US$. This value remained relatively stable through 2021 before experiencing a sharp contraction to 45.98 US$ in 2022.

Correlation Analysis

The decline in the P/BV ratio through 2021 was driven primarily by the growth in BVPS outpacing share price movements or by the share price failing to maintain premiums relative to asset growth. In 2022, the slight uptick in the P/BV ratio to 1.40 is attributable to the fact that the book value per share declined more aggressively than the market price of the stock.