Updates For Mastercard, Fortinet, and Paycom

Earnings season continues to chug along, and today I've got 3 more updates for stocks under our purview: Mastercard, Fortinet, and Paycom. Let's take a look.

Mastercard (MA)

As is often the case, Mastercard's results closely mirrored those of primary competitor Visa (V), although - also as usual - Mastercard was just a slight bit better. Revenue for the quarter was up 13% over last year, with gross dollars up 10%, transactions up 11%, and cross border dollar growth of 18%. Value-added services were up 19% - these are Mastercard's offerings to combat fraud and theft, as well as marketing and analytics products. The company was aggressive with share repurchases last year, buying back nearly $2 billion and reducing share count by over 2.5%.

Mastercard continues to chug along with good, predictable outcomes. Growth and guidance was a touch above my expectations, and the fair value gets a decent bump up to $459 from a prior $420.

Fortinet (FTNT)

I'm coming to realize that, frequently, quarterly updates for the stocks in our lists are pretty uneventful. This is a *good* thing! Part of the point in investing the way we do is to have confidence in assumptions about future growth and cash flows. Fortinet continues to follow the path mapped out for it, even with continued declines in product revenue (which was down 10% in Q4). This more than offset by the company's pivot to cloud security sales (up 25%), leading to overall revenues of +10%. Billings (future sales) grew 8.5%, and the company bought back $1.5 billion of stock during the year at very good prices. The quarter and year results looked fine to me.

There were some tweaks to the model but nothing enough to move it off of a $90 price target. The stock is up close to 20% since our last update. Still at more than 20% below fair value, Fortinet is on the border of "buyable" right now.

Paycom (PAYC)

Paycom continues to be an interesting case. Its 4th quarter results were better than a lot of analysts expected, with 17% growth in revenues, and cash profitability within the range of expectations. Client metrics were "meh", with total client count up only 2% from prior year end.

This largely predictable operator did have some interesting news, though. CEO and founder Chad Richison is making room for a co-CEO, former COO Chris Thomas. Thomas has risen in the ranks quickly, joining the company just 6 years ago in 2018. I see this as an additional risk in the stock, as co-CEO arrangements are a mixed bag historically, and the writing on the wall is that the founder CEO situation we love to see probably isn't going to be the case here much longer.

Richison heavily touted Paycom's product roadmap on the conference call. In addition to BETI (which we've covered many times in prior updates), the firm is rolling out GONE. GONE is an AI-based system that can fully automate menial management tasks such as approving/rejecting time off requests. Paycom's native payroll offering also launched in Canada, Mexico, and the UK. There are a lot of initiatives brewing at Paycom, and I think it's only a matter of time before we see another growth pop in this one.

As it stands, though, we need to be conservative and take the firm's guidance for what it is worth. That leads to another reduction in the fair value price, from $302 down to $286. Fortunately, we bought Paycom at a fantastic price, and today's sub-$200 quote continues to represent excellent value for prospective new investors.