Nuvei (TSX:NVEI) is a fintech company that provides pay-in and payout services for businesses worldwide. It operates in over 200 markets, supporting 150 currencies and 615 APMs (alternative payment methods). Last month, the company reported first-quarter earnings, with its revenue beating analysts’ expectations, while its adjusted EPS (earnings per share) was in line with expectations.
The company’s revenue came in at US$256.5 million, against analysts’ expectations of $252.8 million. Meanwhile, its adjusted EPS of US$0.44 was in line with expectations. Despite its solid performance, the company has lost around 32% of its stock value since reporting its first-quarter performance. Concerns over global growth amid prolonged higher interest rates appear to have dragged the NVEI stock price down. Let’s assess whether the sell-off has bottomed out or if more pain remains. First, let’s look at its first-quarter performance in more detail.
Nuvei’s first-quarter performance
In the March-ending quarter, Nuvei’s total volume increased by 45% to US$42.4 billion, with e-commerce representing 90% of the total volume. Organic growth contributed around 29% of the growth, while acquisitions drove the remaining. Supported by solid volume growth, the company’s revenue increased by 20% to US$256.5 million. However, excluding digital assets and cryptocurrencies, the company’s revenue grew by 26% at constant currency.
Despite solid top-line growth, Nuvei’s net losses expanded from US$4.5 million to US$8.3 million. The increase in net losses was primarily due to expenses related to the Paya Holdings integration and one-time acquisition expenses of around $20 million. Meanwhile, its adjusted net income declined marginally from US$69.1 million to US$64.5 million. It also generated an adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) of US$96.3 million. Besides, the company closed the quarter with cash and cash equivalents of US$132.8 million, thus allowing it to support its growth initiatives.
Nuvei’s outlook
With the growing adoption of online shopping, digital payments are becoming popular, thus expanding the addressable market for Nuvei. Amid the expanding market, the payments solutions provider is investing in innovative product development and expanding its footprint. In the March-ending quarter, the company increased its capital investment in new technology development by 40% compared to its previous year. Its APM portfolio expanded to 615 by March 31.
Further, the company acquired Paya Holdings in February, strengthening its presence in high-growth and underpenetrated verticals, such as healthcare, utilities, and government. The company has also expanded its customer base by adding several new blue-chip clients. Besides, it has strengthened its presence in the iGaming and betting sector by signing Resorts Digital Gaming as its client. Given its multiple growth drivers, the Nuvei’s growth prospects look healthy.
Meanwhile, Nuvei’s management expects to make a capital investment of around 4-6% of its revenue in the medium term. Supported by these investments, the company could grow its revenue by over 20% annually. Also, the company hopes to reach adjusted EBITDA margins of 50% in the long run.
Bottom line
Amid the recent sell-off, Nuvei is trading close to 79% lower than its all-time high. Besides, the company’s valuation also looks attractive, with its NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples at 3 and 13.1, respectively.
So, considering its growing addressable market, growth initiatives, and attractive valuation, I believe investors should utilize the steep correction in Nuvei’s stock price to accumulate the stock to earn multi-fold returns in the long run.
