Morningstar Cautious on Vantiv (VNTV) Ahead of IPO

Investors are eagerly awaiting the IPO of integrated payment processor Vantiv, Inc. (NYSE: VNTV) on Thursday, but according to one firm they should stay away.

In Morningstar's pre-IPO analysis of Vantiv, the firm said in their view the stock is "fairly valued toward the lower end ($16) of its intended offering range." Pricing at this level would value the company at a premium compared with its rivals.

While the company should benefit from solid growth in the electronic payments industry and healthy fundamentals, valuation gives Morningstar pause.

Some highlights from Morningstar’s pre-IPO report about Vantiv include:

• Thoughts on Economic Moat: We assign Vantiv a narrow economic moat with a stable trend. We think its business model benefits from scale capabilities and customer stickiness.
  
• Risks to Morningstar’s View: We highlight the firm's limited history as a standalone company, high amounts of debt, increasing regulation, an increasingly competitive industry, and execution risk with its expansion strategy as the key risks.
  
• Valuation: Our preliminary fair value estimate values Vantiv at $16 per share, which implies an above peer multiple owing to the company’s solid growth prospects.

Keep up-to-date with developments on Vantiv's IPO at StreetInsider.com's IPO Insider.

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