This Payments Processor Just Had an AI-Driven Breakout
Alpesh Patel|March 20, 2025
Payment processing powers our entire digital economy.
Yet, it’s a blind spot for most investors.
We’re willing to pay absurd premiums for AI darlings… while the company I have for you today gives you the best of both worlds.
My proprietary algorithm rates it a 9 out of 10… on top of a 12.5% CROCI.
In today’s Dealmaker’s Diary, I’ll reveal why this “digital monetization” giant deserves your attention.
Click on the image below to see my full analysis.
Transcript:
Hello, friends, and welcome to this week’s Dealmaker’s Diary.
The stock of the week is CSG Systems International (CSGS).
Where do I get this from, and why?
Strong numbers and strong data as ever.
Plus, I’ve got an AI angle for you on this one as well.
So let’s dive right in.
In case you haven’t heard of this company – even though it is actually quite a large player in its field – it provides payment processing services.
“Digital Monetization Solutions” is the posh way of saying payment processing.
It’s growing.
As always with my Dealmaker Diary, it’s about the data and the numbers and not the narrative and the story…
But there is a good narrative and story.
There are six points AI points that I’ve picked out here as well, which I think is useful to know.
This informs us of what’s going on and how these companies use AI in a way we might never have thought of.
I’ve certainly learned a lot from this.
But if I go back to my conventional way of selecting stocks, it’s these numbers.
I evaluate the value, growth, and income as part of my proprietary algorithm for measuring stock.
The algorithm gave it a nine out of ten. Anything above seven ticks the box.
We’re looking at valuation.
We’re looking at revenue growth.
We’re looking at dividend yields.
The forecasted P/E (P/E) ratio is 13.7x. For a company using so much AI, that’s low. But a typical number for the payments sector.
Cash returned on capital invested (CROCI) above 10% puts a company the top quartile.
12.5x is a good number.
CROCI is there because Goldman Sachs Wealth Management used this tool.
Deutsche Bank Wealth Management also used this tool to pick stocks for their wealthiest clients because they found it gives them outsized returns.
The Sortino ratio measures the average return versus the risk. 0.08x is a bit disappointing.
However, I think poor performance over the last few months has caused the ratio to drop in the short term.
But, I think that’s about to change.
Volatility is well below 20%, putting it at low end volatility for stocks. So, I like that as well.
If we look at the prices, it’s finally broken out of this downward trend that it’s had for two years.
It has strongly moved back up this year after bottoming out about seven to eight months ago.
It seems to be on an upward trend and an upward trajectory once again.
On a discount cash flow basis, it appears to be undervalued as well.
So, this one ticks a lot of boxes for us.
I’m pleased with it.
I hope you like that.
Thank you very much.
Alpesh Patel
Alpesh Patel is an award-winning hedge fund and private equity fund manager, international best-selling author, entrepreneur and Dealmaker. He is the Founder and CEO of Praefinium Partners and is a Financial Times Top FTSE 100 forecaster. As a senior-most Dealmaker in the U.K.’s Department for International Trade, he is part of a team that has helped deliver $1 billion of investment to the U.K. since 2005 . He’s also a former Council Member of the 100-year-old Chatham House, the foreign affairs think-tank, whose patron is Queen Elizabeth. For his services to the U.K. economy, Alpesh received the Order of the British Empire (OBE) from the Queen in 2020. As a recognized authority on fintech, online trading and venture capital, his past and current client list includes American Express, Merrill Lynch HSBC, Charles Schwab, Goldman Sachs, Barclays, TD Bank, NYSE Life… and more.
