Heartland Payment shares have mostly recovered since the breach. On Jan 16, 2009 they traded at $15.44/share, today they are at $14.93 which is a loss of around 3%. Certainly good news for their investors after they immediately dropped over 50% after announcing the breach. They did not go belly up as many predicted, but how did they do against the market and their peers?
Here is HPY's performance arrayed against two similar business Global Payment and Western Union. HPY underperforms both by around 20 points. Interestingly, the payments space has not had robust performance, since the S&P have outperformed GPN and WU by a wide margin and HPY by over 40 points.
1/16/09 Current Performance
HPY 15.44 14.93 -3.3%
GPN 34.62 41.10 18.7%
WU 14.74 18.09 22.7%
S&P 850.12 1197.75 40.9%
Today, HPY's market cap at $570M. If we assume that is 20% too low compared to its peers, the breach could be responsible for over $100M in lost market cap. Its important to note that this is strictly valuation and not analogous to losing cash. Though, increased borrowing costs, credit ratings and dividends may be impacted (in fact HPY cut its dividend from a high of $0.09/share in 2008 to $0.01/share http://ycharts.com/companies/HPY/dividend#zoom=5). Market valuation is not everything, but it is something, and it will be interesting to watch this performance over time.
The link below charts the daily movement of the stocks, but you can change the date ranges - could not figure out how to share the version with the dates in Yahoo
http://finance.yahoo.com/charts?s=HPY#chart4:symbol=hpy;range=20090116,20101115;compare=gpn+wu+^gspc;indicator=volume;charttype=line;crosshair=on;ohlcvalues=0;logscale=on;source=undefined
Ben Graham said in the short run the market is a voting machine but in the long run its a weighing machine, we have almost two years since the breach announcement, so far the votes are in and the breach appears to have taken a toll. What will happen over the longer term when the weight of returns is measured?
Comments