Could the EML Payments Ltd (ASX:EML) share price be a buy right now? The company is achieving a lot of growth as economies re-open.
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The EML Payments Ltd (ASX: EML) share price could be worth looking into right now with the level of growth that it’s achieving at the moment.
What does EML Payments do?
EML Payments develops tailored payment solutions for organisations to make it easier for their customers to pay or transfer money.
The business says that it has next-generation technology which gives clients the options for disbursement payouts, gifts, incentives and rewards. In FY21 the company is expecting to process over $18 billion in gross debit volume (GDV) in 28 countries across North America and Europe, as well as Australia.
Its payment solutions can be processed in 27 currencies. EML says those payments are safe, secure, easy and flexible.
What has the EML share price done recently?
The last 12 months have been pretty volatile for EML Payments. Just under a year ago, EML bottomed during the COVID-19 crash at $1.33.
By the end of 2020, EML shares had risen 214% from the worst point in the crash.
The EML share price has risen 18% since it reported its half-year result to investors, which included numerous growth statistics.
How good was the report?
EML reported that for the six months to 31 December 2020, group gross debt volume of $10.2 billion, up 54%. Revenue grew by 61% to $95.3 million, underlying earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 42% to $28.1 million and underlying net profit (NPATA) grew by 30% to $13.2 million.
Underlying operating cash flow went up by 68% to $35.1 million.
Whilst volume translates to revenues at different rates depending on the segment, management said that GDV is an indicator of demand for its payment services.
GDV from its general purpose reloadable (GPR) segment grew GDV by 233% to $4.87 billion despite the lockdowns and social distancing in key markets of Spain, France and the UK. Whilst the acquired business Prepaid Financial Services (PFS) made $3.12 billion – better than management’s expectations – the non-PFS businesses grew 25% year on year, with good organic growth in salary packaging (up 60%) and gaming (up 42%).
Gift and incentives saw continued difficult challenges because of shopping centre closures, lockdowns and social distancing regulations, with GDV falling 11% to $0.75 billion. EML is expecting this division to recover in FY22 as economies re-open.
The virtual account numbers (VANs) segment saw GDV growth of 6%, largely driven by volume from existing customers. The December exit run rate finished at $815 million per month, up 20% on the same month last year, which the company said was a positive sign for the rest of the year.
Why the EML share price could be worth looking at
Broker UBS rates EML shares as a buy. It has a share price target of $5.70 for EML. The broker believes growth can continue for the business and that investors may become more confident about its potential again.
For the full FY21 result, EML is expecting revenue to grow by 48% to 56%, EBITDA to grow by 54% to 66% and underlying net profit is expected to grow by 25% to 40% to $30 million to $33.5 million.
It has continued to sign new contracts with customers in each segment and has been seeing more activity.
In the GPR segment, it has signed 55 contracts and in the gift and incentive segment it has signed 19 contracts. In the VANs segment, it has signed five contracts.
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Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of and recommends EML Payments. The Motley Fool Australia has recommended EML Payments. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.