Fiserv (NASDAQ:FISV) has been one of the most consistent and best-performing stocks over the past decade. It has had 11 straight years of positive annual returns through 2019, and over the last 10 years it has posted an annualized return of about 23%.

Last year it made a big move to buy First Data, which gives the company greater scale and broader offerings, as First Data brings complementary capacities. But it also brought in a lot of debt. On top of that, earnings and revenue have been challenged by a global pandemic and resulting recession. At Wednesday's close, Fiserv's stock price was down about 11% on the year.

After a decade of strong growth, Fiserv's multiples are very high, with a price-to-earnings ratio of around 82. Given its muted growth and high valuation, is Fiserv too expensive right now?

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Big move to expand and grow

Fiserv is a fintech that develops the technology banks and financial institutions use to process payments and move money. Overall, more than $1 trillion is moved every year via Fiserv's technology. Fiserv has long been one of the few dominant players in the niche core processing industry, with about 37% market share.

The company also provides payment processing at the point of sale through its 2019 acquisition of First Data and its Clover payment system, a competitor of Square. Fiserv hopes to increase its market share long term through this acquisition.

Taking into account the First Data acquisition, which closed in July 2019, adjusted earnings were down 5.8% year over year to $631 million in the second quarter, while adjusted revenue dropped 12% to $3.2 billion. This was primarily due to lower payment revenue and debit transactions, both of which were impacted by the pandemic, explained Robert Hau, CFO and treasurer, on the second-quarter earnings call.

Revenue in this segment tends to be driven by transactions and/or accounts, and tends to be fairly resilient in the typical recessionary periods. But this pandemic has been different, for example, debit-oriented transactions, which have historically been very resilient were impacted much more than prior recessionary periods and have solidly improved, consistent with the reopening, since the trough in early April.

Earnings were also severely impacted by higher expenses, which were primarily merger-related. This resulted in a drop in adjusted operating margin from 29.7% a year ago to 28.8% at the end of the second quarter. But there are a few good reasons to like where Fiserv is headed.

Fiserv is a buy

The earnings outlook for the rest of the year and beyond is strong. Fiserv expects to finish the year with 10% earnings growth, driven by strong sales growth. Sales were up 38% in the second quarter year over year and 20% year to date. Most notably, the company had two major wins in its credit card processing business, signing on with Atlanticus Holdings and Genesis Financial Services, two providers of consumer credit solutions. Overall, the company added 42 new bank merchant clients in the quarter, with about 70% being competitive takeaways. Since the First Data merger closed, Fiserv has signed more than 160 banks and credit unions and clients with a strong pipeline -- exhibiting the potential strength of this new merger. The company cites its highly configurable processing platform and breadth of integrated solutions as major competitive advantages.

The sales spike generated almost $900 million in free cash flow in the quarter, up 23% year over year. Year-to-date free cash flow is $1.7 billion through the second quarter, up 13%, and about $3.5 billion since the merger. This has allowed the company to pay down some of the debt it brought over from First Data -- about $1.5 billion of its $21.5 billion in long-term debt. It expects to continue to pay down debt next year with its strong free cash flow, along with expense savings from the merger, with an expectation to reach its targeted leverage in the middle of 2021.

As a result of double-digit earnings growth expectations and its debt and expense reduction plans, Fiserv's forward P/E is expected to come down significantly, from about 82 now to around 19 for 2021. That makes Fiserv a great buy right now at this reduced price.