Jack Henry & Associates, Inc. (JKHY): A Bull Case Theory

We came across a bullish thesis on Jack Henry & Associates, Inc. on Bob’s Payment Stock’s Substack by Bob Hammel. In this article, we will summarize the bulls’ thesis on JKHY. Jack Henry & Associates, Inc.'s share was trading at $180.90 as of July 24^th. JKHY’s trailing and forward P/E were 30.82 and 28.33, respectively according to Yahoo Finance.

Jack Henry & Associates stands out among bank technology providers with consistent 7%+ organic revenue growth, stable demand, and strong relationships with U.S. community banks and credit unions, supported by six-year contracts and low attrition. The company’s portfolio includes core processing systems, digital banking through its Banno platform, card processing, ACH, bill pay, and fraud management, all benefiting from user- and account-based revenue models that scale with clients.

Despite its durable growth, margins have stagnated due to rising costs, continued investment in innovation and security, and margin-dilutive acquisitions, while free cash flow conversion has fallen to 69% from nearly 90% historically, largely because of tax code changes, lower deconversion fees, and increased vendor prepayments. Shares trade at 26.8x fiscal 2026 EPS estimates, a multiple compressed from prior highs despite EPS compounding at 9% annually since 2019, as investors question the pace of margin expansion and free cash flow recovery.

With gross leverage of just 0.2x, disciplined capital allocation, and returns on tangible assets in the low-20% range, Jack Henry is positioned to support increased dividends and opportunistic buybacks. Management’s modernization roadmap, modular product design, and continued share gains from Fiserv and FIS underscore a long-term growth runway.

Risks include banking consolidation, technological disruption, and competitive pressure, but resilient demand, embedded customer relationships, and a prudent operating model provide a strong buffer. A fair value estimate of $168 implies limited upside at current prices, with $150 seen as an attractive entry. Successful margin expansion and restored free cash flow conversion could drive a meaningful rerating.

Previously, we covered a bullish thesis on Cognizant Technology Solutions Corporation (CTSH) by Magnus Ofstad in May 2025, which highlighted CTSH’s AI-led productivity strategy, accelerating revenue growth, and expanding partnerships. The company’s stock price has depreciated by approximately 1.24% since our coverage as macro uncertainties tempered sentiment. The thesis still stands as CTSH advances its AI-focused growth. Bob Hammel shares a similar view, emphasizing Jack Henry’s predictable growth and disciplined capital allocation in bank technology.

Jack Henry & Associates, Inc. is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 31 hedge fund portfolios held JKHY at the end of the first quarter which was 31 in the previous quarter. While we acknowledge the potential of JKHY as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None.