Mizuho: Mobile Payments Firm Fleetcor Technologies Shows a Growing Weakness

Fleetcor Technologies, a company known for offering vehicle fleets access to mobile payments technology to cover the bills at refueling stops and similar services, has a wide range of business under its umbrella. Some might believe that that level of diversification is a pretty fair risk-beater, but a new report sent our way from Mizuho Payments suggests that Fleetcor’s metaphorical check engine light may be on in the wake of new financial reports.

The word from Mizuho wasn’t bright for Fleetcor. The first point that hit Fleetcor was that one of Fleetcor’s primary growth engines, “materially accretive acquisitions”, are proving “increasingly unlikely” thanks to rapid growth in asking prices. This is going to threaten the historically-impressive growth rate of over 20 percent Fleetcor has seen of late.

What’s more, Mizuho expects Fleetcor’s growth rate—specifically, its earnings per share (EPS) growth rate—to moderate and even adjust downward a bit into the “mid-to-high teens”, instead of the compound annual growth rate (CAGR) EPS growth of roughly 25 percent or so it’s been since its initial public offering (IPO) took place back in December 2010.

Mizuho finally notes that shares are trading about where they should be, at fair value, and thus the company releases a rating of Neutral overall.

This isn’t exactly a disaster for Fleetcor. Basically, Mizuho seems to be projecting that the days of easy growth at Fleetcor have largely concluded, and that finding new sources of high growth will be somewhat more difficult. This explains why the company is currently holding at a Neutral ranking, with neither buy or sell being suggested. There will be growth, but it will be smaller, and it will be that much tougher to hold. It was largely inevitable that Fleetcor couldn’t grow forever. New competitors enter the market and try to take market share out from under the established firms to try and get their own shot at 25 percent CAGR growth rates, just like Fleetcor once did.

Fleetcor isn’t going away any time soon; fleets will still need gas cards and the like, and if Fleetcor can innovate this particular concept a little further—we’ve already seen new growth in this sector from places like Gas Pos—it might be able to hold onto its status.