Nuvei (TSX:NVEI) is one of Canada’s hottest financial technology (fintech) stocks. Primarily a payments company, it allows people to send and receive payments, from credit cards to Paypal to cryptocurrency. Many payment companies exist, but NVEI is unique in that it empowers businesses to accept hundreds of different methods. This makes it a kind of “one-stop-payment shop” for businesses.
Over the last few years, Nuvei stock has been struggling. It hit a peak of $171 in 2021 and has fallen precipitously since then. Today it trades for just $45. Those who bought the highs in NVEI stock two years ago may struggle to break even. However, this year, the stock staged an impressive 28.5% comeback rally, for reasons I’ll explain in the ensuing paragraphs.
Strong growth
Since it went public, Nuvei has enjoyed consistently high growth. This year, the growth is slower than it was in past years, but it’s still pretty strong on the top line.
Over the last five years, NVEI has compounded its revenue, EBIT, and EBITDA at the following CAGR growth rates:
- Revenue: 44%
- EBITDA: 28%
- EBIT: 39%
Additionally, the company has grown its free cash flow at a 44% CAGR over the last three years. Over three- and four-year timeframes, the growth has been strong. It has been less strong in the last 12 months. In that period, the company’s revenue only grew 12.5%, and its earnings and free cash flow declined. Nevertheless, the continued top-line growth suggests that the company may be able to start growing its profits again if it can find ways to cut costs.
Newly profitable
One thing that NVEI has going for it – that its peers can’t boast – is profitability. The company achieved positive net income in 2021, and it has been profitable ever since then. It had $0.54 in earnings per share (EPS) in 2022, and $0.42 in the trailing 12-month period. The payments processor also had $330 million in free cash flow in 2021, $320 million in 2022, and $183 million in the trailing 12-month period. Granted, the amount of free cash flow has been declining, but nevertheless, NVEI has two earnings metrics – EPS and FCF – that appear to be positive.
Not particularly expensive for a tech stock
Perhaps the number one thing that Nuvei has going for it, compared to tech stocks like Shopify and Lightspeed POS, is that it is not particularly richly valued. At today’s prices, it trades at:
- 18 times adjusted earnings.
- 108 times GAAP earnings.
- 5.3 times sales.
- 2.4 times book value.
- 17.8 times operating cash flow.
- 25.3 times free cash flow.
For a young tech company with historically high growth (45% revenue growth year over the last five years), this is actually a pretty modest valuation. The catch is that NVEI’s growth hasn’t been as strong in recent years compared to the longer-term past. This past year, the revenue growth rate was only 12.5%. Following a short report by Spruce Point Capital, NVEI suffered major PR issues, revolving partially around claims that it had ties to the bankrupt crypto firm FTX. Since then, its stock price has recovered somewhat, but its revenue growth remains way down from the long-term averages.
