NVEI:CC - Up Over 35% This Month: Is Nuvei Stock a Buy Right Now?
2023-11-23 20:30:00 ET
On Tuesday, Statistics Canada announced that the Consumer Price Index rose 3.1% in October from its previous year. It was lower than analysts’ expectations of 3.2% and September’s 3.8%. With the signs of inflation easing, investors could expect the central bank to ease its monetary tightening initiatives. Amid the optimism, the Canadian equity markets are upbeat this month, with the S&P/TSX Composite Index rising 6.6%.
Meanwhile, growth stocks are back on focus with improving investors’ sentiments. Nuvei ( TSX:NVEI ), which reported a solid third-quarter performance earlier this month, is trading 38.4% higher this month, outperforming the broader equity markets. Despite the recent surge, it is down 55% from its 52-week high. So, let’s assess whether the stock is still a buy by looking at its recent third-quarter performance and growth prospects.
Nuvei’s third-quarter performance
In the third quarter, Nuvei reported revenue of $304.9 million, representing 55% year-over-year growth. Solid organic growth, strategic acquisitions, and favourable currency translation drove its financials. The company processed $48.2 billion of transactions during the quarter, representing 72% year-over-year growth. Organic growth at a constant currency contributed around 20% of the volume growth. Meanwhile, e-commerce dominated, representing approximately 88% of the total transactions.
Despite the topline growth, the company incurred a net loss of $18.1 million against net profits of $13 million in the previous year’s quarter. However, removing special items, its adjusted net income stood at $56.8 million, a 9% decline from the previous year’s quarter. Higher finance, depreciation, and amortization expenses dragged its adjusted net income down. Meanwhile, its adjusted EBITDA (earnings before interest, tax, depreciation, and amortization) grew 36% to $110.7 million. However, its adjusted EBITDA margin fell 490 basis points to 36.3%.
Amid its initiatives to strengthen its balance sheet, the company’s leverage ratio (net debt/trailing 12 months adjusted EBITDA) declined to 2.6 compared to 2.8 in the previous quarter. Now, let’s look at its growth prospects.
Nuvei’s growth prospects
Nuvei focuses on expanding its product offerings, venturing into new markets, and expanding its APM (alternative payment methods) portfolio to add new customers and grow wallet share with existing customers. By the end of the third quarter, the company supported 669 APMs. Besides, it opened a new office in China to expand its footprint across the Asia-Pacific region.
Amid its continued strong operational performance, Nuvei’s management has raised its guidance for this year. The midpoint of its 2023 revenue and adjusted EBITDA guidance represent 40.5% and 22.7% growth from the previous year, respectively. In the medium term, the company hopes to grow its revenue at 15–20% annually while making capital investments of 4–6% of its revenue. Also, the company’s management is optimistic about achieving an adjusted EBITDA margin of above 50% in the long run. So, the company’s outlook looks healthy.
Investors’ takeaway
Despite the healthy buying this month, Nuvei trades at NTM (next 12 months) price-to-sales and NTM price-to-earnings multiples at 2 and 9.7, respectively. Given its high growth prospects, I believe the company is trading at a cheaper valuation, making it an attractive buy. Besides, it also pays a quarterly dividend of $0.10/share.
The post Up Over 35% This Month: Is Nuvei Stock a Buy Right Now? appeared first on The Motley Fool Canada .
Fool contributor Rajiv Nanjapla has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nuvei. The Motley Fool has a disclosure policy .
2023