Since the early 1980s, VeriFone (NYSE: PAY) has provided a vital service for thousands of merchants by processing checks and credit card transactions. Now, VeriFone is doing something rarely seen in an industry that seems to be fully mature; it's showing that a company can grow again.
In the second quarter, revenues increased 17% to $147.6 million. Adjusted earnings, which exclude non-cash items, were $0.28 per share, up from last year's $0.20 per share. On the news, Verifone's stock surged upward by 20% on Friday.
VeriFone has a comprehensive offering of point-of-sale solutions, such as readers, touchscreens, printers, and even web servers. The systems integrate with complex payment networks -- including Visa, MasterCard (NYSE: MA) and American Express (NYSE: AXP) -- and allow for a myriad of payment methods (debit cards, smart cards, and even RFID cards).
In fact, there are several major favorable trends for VeriFone. First, in North America, companies are upgrading their payment systems. This usually means using Web-based approaches and wireless approaches.
Next, there are growth opportunities in emerging markets such as China, Eastern Europe, and India. For example, to aggressively push into these markets, VeriFone is purchasingLipmanElectronic Engineering (Nasdaq: LPMA), which is a leader in wireless payment transactions and gets 70% of its revenues from outside the U.S.
True, VeriFone has fierce competition from players such as IBM (NYSE: IBM) and NCR (NYSE: NCR). Then again, this company has a trusted brand, a finely tuned infrastructure, and end-to-end solutions.
Moreover, it continues to innovate or buy innovators. it recently purchased the payment systems business of TrintechGroup (Nasdaq: TTPA), which is a developer of self-service, vending, and pay-at-the pump systems.
In light of the all these positives, it should be no surprise that VeriFone upped its guidance. Full-year adjusted earnings is forecasted at $1.07 to $1.08 in 2006 and $1.40 to $1.42 in 2007.
But given the overall growth of its target markets, the company has the opportunity to grow for the long term. And given its track record, its team seems up to the task.
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Fool contributor
Tom Taulli
does not own shares mentioned in this article.
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