Fidelity National Information Services Inc (FIS)

Conclusion

Fidelity National Information Services provides core processing, payments, risk and capital markets solutions to financial institutions and businesses worldwide, through its Banking Solutions and Capital Market Solutions segments. At 28.34 USD per share, the market capitalisation is 14.6 billion USD and the enterprise value is 34.6 billion USD.

The verdict is undervalued. The P/E of 4.2 compares with a median of 56.8 over 8 available points, and EV/EBITDA of 5.3 compares with a ten-year median of 15.3. The DCF gives 75.83 USD per share at a discount rate of 9.16%. The fair value band runs from 70.76 to 106.14 USD, with a midpoint of 88.45 USD and a margin of safety of 212.1%. The fair value from historical multiples is 101.07 USD. The reverse DCF implies growth of -9.2%, against a five-year revenue CAGR of -3.2% and a five-year FCF per share CAGR of 0.5%.

What holds the case up: free cash flow conversion of 69.5% (TTM), an operating margin of 17.3%, and a five-year share count CAGR of -3.7%. What would break it: an Altman Z-score of 0.15, a current ratio of 0.55, and net debt to EBITDA of 3.06.

Financial health

The colour is grey because FIS is a financial business, where debt is part of the trade, so the scorecard assesses no metrics here. The current ratio is 0.55 and the quick ratio is 0.41. Net debt to EBITDA is 3.06, debt to equity is 1.28, and interest coverage is 6.0 on a TTM basis. The Altman Z-score is 0.15, in the distress zone, although the Altman model was designed for manufacturers and FIS is not one. The Ohlson insolvency model does not apply to a financial business, so no insolvency probability is given. Debt-related ratios should be read against the company's model of carrying debt as a core part of its business.

Earnings quality

The colour is green, held up by strong cash conversion, a low accrual ratio and buybacks, and weighed on by falling estimates. Free cash flow conversion is 69.5% on a TTM basis, while the five-year figure is not available. The accrual ratio is -7.7%, and stock-based compensation is 1.5% of revenue, leaving free cash flow after it at 2.2 billion USD. The share count fell at a five-year CAGR of -3.7%. The Piotroski score is 6 of 9 and the Beneish M-score is -2.72, pointing to unlikely earnings manipulation. FIS beat estimates in 5 of the last 8 quarters, with an average surprise of 1.5%. However, analysts have cut the current-year estimate, with 26 downward revisions against 1 upward in the last 30 days.

Profitability

The colour is green. The operating margin of 17.3% is slightly above its ten-year median of 17.1%, and the gross margin of 35.8% is close to its median of 36.0%. The net margin of 26.8% is far above its median of 3.3%, and margin stability is 13.8%. ROIC is 7.35% against a WACC of 5.65%, giving a ROIC minus WACC of 1.7%, assessed as neutral. The five-year median ROIC is only 2.4%. ROE is 21.4%, but the DuPont split for 2025 shows a net margin of 3.6%, an asset turnover of 0.32 and an equity multiplier of 2.41, so leverage contributes materially to the return on equity.

Growth

The colour is yellow: earnings growth is strong, but revenue has been shrinking over five years. Revenue grew at a CAGR of 3.2% over three years, fell at -3.2% over five years, and grew at 4.9% over ten years. Revenue rose in 7 of the 10 comparable years. EPS grew at a five-year CAGR of 23.9%, but fell at -10.3% over ten years. Free cash flow per share grew at 8.7% over three years, 0.5% over five years and 8.1% over ten years. Consensus expects EPS growth of 7.4% next year.

Valuation

The colour is green. The current P/E is 4.2, EV/EBITDA is 5.3, price to free cash flow is 6.1, price to sales is 1.1 and price to book is 0.9. Against their ten-year medians, these are premiums of -92.6%, -65.4%, -70.2%, -72.0% and -53.6%, respectively. The DCF gives 75.83 USD per share, using a discount rate of 9.16%, first-stage growth of 4.9%, terminal growth of 2.5%, and a terminal value share of 54.8%. The fair value is an order-of-magnitude estimate built on fixed assumptions, including a 5% equity risk premium and capped growth, and is not a price target. The dividend yield is 6.1%, the forward yield is 4.4%, and the payout on free cash flow is 37.2%.

Risks

The weakest numbers are the Altman Z-score of 0.15, the current ratio of 0.55 and net debt to EBITDA of 3.06. Together they mean limited liquidity headroom and a heavy debt load relative to earnings. Interest coverage of 6.0 gives less room if earnings fall, and five-year revenue decline of -3.2% weakens the growth case. Falling estimates may signal further pressure on earnings. The five-year free cash flow conversion is not available, and no insolvency probability is given because the model does not apply. This analysis has limits: it has no debt maturity schedule and no revenue breakdown by segment, so refinancing risk and the drivers of revenue cannot be assessed.