Nuvei (TSX: NVEI) stock had a great run in the 2021 tech bubble. From the beginning of that year until the September 17th peak, the stock rallied 153%. It was a great run for those who got out in time. However, once the tech bubble burst in the middle of 2021, NVEI stock went into a freefall. It declined 52.3% from the highs by the end of 2021 and has fallen a further 59% since then. All told, the stock is down over 80% from its all-time high!
The question investors have to ask now is, “Is NVEI possibly a buy now at today’s newly low price?” Certainly, there was a good opportunity to make money off of NVEI stock back in 2021, but that moment has passed. The real question is whether it’s too late to buy the stock now or whether another bull run is coming. In this article, I will explore Nuvei’s business and stock to attempt to determine whether it is buyable now.
Nuvei: Recent earnings results
To determine whether Nuvei stock is a buy, we first have to look at its most recent earnings. Here, we find some concerning signs.
In the most recent quarter, Nuvei delivered the following:
- $48.2 billion in sales volume, up 71%
- $305 million in revenue, up 55%
- -$18.1 million in net income, down from $13 million in positive net income
- $56.8 million in adjusted net income, down 8%
- -$0.14 in earnings per share (EPS), down from $0.08 in positive EPS.
The high revenue growth was, of course, commendable, but earnings turned negative following a profitable period for the company. It’s not a good look. The next question we need to ask ourselves is, “Why did this happen?”
Nuvei said in its third-quarter (Q3) press release that it lost money because it drew down its revolving credit facility. A “revolving credit facility” is like a line of credit for a company; it’s an amount the company is pre-approved to borrow. Borrowing money, in itself, is not a loss. So, we need to know why this draw down caused a loss to appear on Nuvei’s financial statements.
After peeking into Nuvei’s financial statements, I noticed that some of its debt is at a variable rate. On some of its older debt, it is paying the rock-bottom rate of 1% per annum. The recently drawn-down debt, however, is more expensive. It might be that the net loss recorded on Nuvei’s financial statement reflects an increase in the cost of debt. The interest expenses in themselves were not that high in Q3, but debt liabilities factor in future interest expenses: it might be that an increase in NVEI’s debt liability was what caused the Q3 decline in earnings.
Long-term trajectory
Unlike its most recent quarter, Nuvei’s long-term trajectory is not bad. Over the last three years, the company has compounded its revenue, earnings and assets at the following compounded annual (CAGR) rates:
- Revenue: 47%
- Operating earnings: 20%
- Assets: 41%
This picture is much better than the most recent quarter. With that said, I’m personally not rushing out to buy Nuvei stock. Its financials are pretty good: in addition to the high growth, the company has a debt-equity ratio of just 0.6. However, the fintech industry is extremely competitive: there are countless other payment companies worldwide developing card readers just like NVEI’s. Too much competition is bad for margins. I don’t think that those who are buying this are necessarily out to lunch, but I’m not interested, personally.
