Fiserv (FISV) trades at premium valuations to its peers. This can be judged by the company’s PBV (price-to-book value) multiple or its one-year forward PE (price-to-earnings) multiple.
PBV ratio compares the company’s current market price to its book value. PBV ratios are commonly used to compare financial services firms because most assets and liabilities of banks are constantly valued at market value. If a company trades lower than its book value, it means the asset value is overstated or the company is generating a poor return on its assets.
Generally, banking stocks trade between one and two times their book value. Stocks trading lower than their book value attract investors’ attention since they’re considered to be generating extremely poor returns.
FIS has a PBV multiple of 2.7x, and JKHY trades at a PBV multiple of 7.4x. Similarly, FIS has a PE multiple of 34.5x, and JKHY has a PE multiple of 31.9x. These premium valuations and FISV’s growth in the last few years make it expensive at current valuations.
So far in 2016, Fiserv (FISV) shares have outperformed the financial sector (XLF) as well as the broad market (SPY). The company has risen 17.8% during the year so far. Year-to-date, shares of peers Fidelity National Information Services (FIS) have risen 29%. By comparison, shares of Jack Henry & Associates (JKHY) generated returns of 12.3% so far in 2016.