FIS (NYSE: FIS)

A Potential Low Risk Double

FIS sits at the confluence of two industries that are currently hated – software and payments.

Here’s why it’s interesting. The company will generate about $2B in FCF in 2026 on its way to $3B in 2028 after it fully integrates the “issuer solutions” business it acquired from Global Payments this year. In three years, FIS will have about $15B in debt as they use FCF to pay down acquisition debt. If it turns out, FIS can continue to grow revenue organically at 4%, it would not be crazy to assign a 20x multiple to it 3 years out, arriving at an EV of $60B. Subtract out the debt and the equity would be worth $45B vs the $25B it currently trades for. That equates to a compound return of 22% - not shabby.

That’s the easy part of this story. The real question is how likely is this business to keep growing for the next ten years?

Let’s get into what FIS actually does. Here’s a summary from Gemini.

The company is now organized into two primary pillars:

1. Banking Solutions

This is the heart of FIS, focusing on the technology that allows banks and credit unions to operate. Following the recent acquisition, this segment is now divided into two clear divisions:

• FIS Total Issuing™ Solutions: This is the newest and largest component, formed by merging Global Payments’ issuer business with FIS’s legacy debit/prepaid assets. It is the world’s largest credit card issuing platform, processing over 40 billion transactions annually. It provides the “back-end” for credit card programs, fraud prevention, and loyalty schemes for the world’s biggest financial institutions.

• Core Banking: FIS provides the “operating system” for banks—managing ledgers, processing deposits, and handling the digital banking interfaces you see on your phone. Their focus here is moving legacy banks to the cloud and integrating AI to automate compliance.

2. Capital Market Solutions

This segment serves investment banks, hedge funds, and corporate treasuries. It is a high-margin business that focuses on:

• Trading and Asset Management: Software that manages the lifecycle of a trade, from execution to settlement.

• Corporate Treasury: Tools for large corporations (like those in the S&P 500) to manage their cash, risk, and insurance.

• Automated Finance: Recently moved into this segment, this focuses on using AI to handle complex financial workflows and data analytics for institutional investors.

As you can see from the below snapshot, this isn’t exactly a high growth business. In fact, in the last seven years, revenue has grown at a measly 4% CAGR. This is not entirely surprising when you consider the customers of FIS and their own growth rates.

I don’t expect revenue growth to accelerate over the next 3-5 years, but as I described at the beginning of this post, the business just needs to show staying power for the next 20 years to be a good investment at current prices. Their end customers are inherently risk averse, so the odds of them replacing the rails on which their businesses run seems low.

Risks

1. Higher unemployment caused by AI means banks struggle with rising delinquencies. This may make them hesitant to spend more on technology causing FIS to stop growing or even shrink. The mitigant is valuation. Even at a 15x multiple on anticipated FCF, the equity is worth $30B, so you don’t lose money.

2. Management is unproven as both the CEO and CFO have only been in their roles for about three years. The CEO is a former accountant. I can’t think of any examples where a bean counter has a good track record as a CEO. I can, however, think of several companies that have been brought down by such CEOs. Intel and Boeing come to mind.

Opportunities

1. AI could help them shrink their workforce and improve margins. They currently have 44,000 employees with 27,000 of them outside the US.