Nuvei (TSX: NVEI) is one of the top Canadian stocks this year, with returns of around 63%. Its solid fourth-quarter performance and optimistic near- to medium-term guidance appear to have improved investors’ confidence, leading to strong buying. Despite the recent massive increase in its stock price, the company trades at a discount of 68.5% from its all-time high. So, let’s assess whether Nuvei would be an excellent buy at these levels. Meanwhile, let’s first look at its recently announced fourth-quarter performance.
Nuvei’s fourth-quarter performance
Despite the weakening consumer spending amid rising inflation, Nuvei’s total volumes grew 28%, with e-commerce witnessing an impressive growth of 91%. Meanwhile, the company overcame the negative impact of currency translation and volatility in digital assets and cryptocurrencies to drive its total revenue, which grew by 4%. However, excluding these negative impacts, the company’s organic revenue growth stood at 26%. New product launches, APM (alternative payment method) portfolio expansion, strategic investments, and new market additions drove its top line. In 2022, it launched 96 new products while expanding its APM portfolio to 603.
Supported by its top-line growth, Nuvei’s adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) and net income grew by 11% and 10%, respectively. The company ended 2022 with a cash balance of $752 million. So, it is well equipped to fund its growth initiatives. Now, let’s look at its growth prospects.
Outlook
The e-commerce growth and increased penetration of internet services have made digital transactions popular, thus expanding Nuvei’s addressable market. The digital payments market could witness healthy growth in the coming years. Grand View Research projects the global digital payments markets to grow at around 20% for the rest of this decade. Amid the growing demand for its services, Nuvei is focusing on strengthening its market share.
In February, it acquired Paya Holdings for $1.3 billion. The acquisition could strengthen the company’s position in the United States’s healthcare, utility, government, and non-profit verticals. Paya Holdings had processed around $50 billion worth of transactions in 2022.
Supported by its organic growth and acquisition, Nuvei’s management expects its total volume to be between $194-$200 billion, with the midpoint of the guidance representing a 54.3% growth from the previous year. The midpoint of the company’s revenue and EBITDA guidance represent a growth of 47.5% and 32.7%, respectively. Additionally, the company’s medium- to long-term guidance also looks healthy.
The management is optimistic about growing its revenue at an annualized rate of over 20% in the medium term. It expects its adjusted EBITDA margin to cross 50% in the long run. So, the company’s outlook looks healthy, despite macro headwinds.
Investors’ takeaway
Amid the fallout of the banking crisis, many economists predict a recession during the latter part of this year. So, I expect the company to witness volatility in the near term. However, given its expanding addressable market, growth initiatives, and attractive next 12-month price-to-earnings multiple of 19.6, I expect Nuvei to deliver multi-fold returns over the next 10 years. So, investors with a long-term investment horizon can start accumulating the stock at these levels.
