We think FLT could have ~45% upside by YE17 from current prices and might be trading at ~12.5x 2018
Adj EPS. The math to get there utilizes a target forward P/E of 18x and assumes a 2018 Adjusted Cash
EPS figure of $12 representing a ~mid 20s EPS CAGR from 15-18’. Given the business quality, history,
best in class management team, and long-runway for growth beyond 2018, we believe that FleetCor
could trade for at least 18x forward earnings by YE17. Over the last 3 years FLT’s median Street Estimate
forward P/E multiple has been closer to ~23x. Since the IPO in late 2011 it has been ~20.5x (Bloomberg
We believe that this business could be a compounding machine for many years just like it has been in
the past. The FLT product portfolio retains top positions in a number of large and attractive TAMs with
minimal competition, under penetration, and high value propositions to the customer. Management
has a strong track record of growing the business, which we discuss below, and continues to position the
company in attractive end markets with acquisitions made over the last few years. As a testament to
the quality of this platform and the leadership behind it – from 2005A to 2015A FLT compounded
revenue at ~28% and Adjusted Net Income at ~33%. Since 2010, FLT has compounded revenue at ~31%
and Adjusted Net Income at ~34%, which includes recent macro headwinds discussed later. This growth
includes ~65 acquisitions over time, the largest completed in 2014, but historically growth was achieved
without significant leverage. Management used to note that approximately half of their historic growth
was organic and half was driven by acquisition.
In the company’s own words:
“So first, I am going to spend a few minutes telling you a little bit who we are, the industries that we're
in, the geographies that we actually do business in. First and foremost, we view ourselves as a workforce
payment product company. We primarily offer Fleet Cards, but we have a number of different products
around the world as well. About 70% or so of our revenue is derived from the management of our various
fuel card assets around the world and the other 30% is our workforce payment products.
So as an example, just to mention a few products, again fuel cards, hopefully most of you are familiar
with those. Again, we manage -- 70% of our revenue or so is derived from that. We also have -- in the
United States, we have hotel cards. We have telematics products in the United States. We have virtual
cards in the United States and we also manage a gift card business in the United States, so we are one of
the largest gift card provider as well.
And then, internationally, we have many different sorts of products as well that are unique to some of
the geographies that we're in. Again, we primarily manage fuel card assets around the world, but
internationally we also have maintenance products. We have telematics products. We have toll,
transportation, payroll, and we have food card products as well.
The beauty of these products is they all have relatively the same margin dynamics. We are a relatively
high margin type business. Our EBITDA margins run over 50% around the world. And obviously, we have
some products with EBITDA margins as high as 90%, and on the low end, we are probably in the 40%
range. And then, on the average, we're in the low 50%s.