Nuvei Corporation (TSX: NVEI) is a provider of payment technology solutions to merchants and partners in North America, Europe, The Asia Pacific, and Latin America. The solutions provided by the company are mobile payments, online payments, and In-store payments.

Key highlights

• Robust Total Volume Growth: The group's overall volume climbed by 88% to USD 21.6 billion from USD 11.5 billion in the previous similar quarter, indicating robust growth. The eCommerce segment accounted for 83% of the total volume. On YTD basis the volume grew 119% to USD 64.1 billion. Strong volume growth was seen in all of the respected regions, which is a major plus.

Source: Company filings, Analysis by Kalkine Group 

• Consistently rising revenue: Even during a period of turbulence, the corporation has enjoyed revenue growth on a sequential basis. Compared to Q3 2020, the company's sales climbed by USD 90.2 million, or 96% in Q3 2021. The increase in revenue is mostly due to organic growth and to a lesser extent, acquisitions, as well as an increase in volume.

Source: Company, Analysis by Kalkine Group 

• Generating strong Adjusted EBITDA and Margin: On the back of the robust total volume and increased revenue, the company is earning better-Adjusted EBITDA on a sequential basis, which is a significant positive. It grew from USD 41.0 million in Q3 2020 to USD 80.9 million in Q3 2021, improving by 97%. Further, the margins remained stable at 44% in the last five reported quarters. Maintaining margins at a healthy rate is appreciable.

Source: Source: Company, Analysis by Kalkine Group 

• Surge in cash flows: The company reported a higher cash flow of USD 201.8 million in 9MFY21, as compared to USD 48.9 million in pcp, supported by a net income of USD 94.7 million in 9MFY21, versus a net loss of USD 126.2 million in pcp. The above indicates better operational efficiency and improved liquidity.

• Strong Guidance for Q4 2021 and FY2021: Considering the strong performance in Q3 2021, where the company exceeded its previously anticipated total volume, revenue, and adjusted EBITDA outlook, as well as continuing momentum in the business, the management raised the financial outlook for FY2021 and Q4 2021, where it expects strong numbers, which is a significant plus.

Source: Company Presentation 

Risks associated with investment 

The company is in the Information technology sector hence, the significant risk of technological change arises. Besides this, a serious threat that always looms is the risk of Cyber threats and scams, which could hamper the company in monetary and non-monetary terms. Other risks are also there, such as acquiring new merchants and partners, consumer spending trends, evolving industry standards, intense competition, Currency fluctuations etc.

Financial Overview of Q3 2021

Source: Company Filing

• In Q3 2021, the Company’s posted revenue increased by 96% to USD 183.9 million compared to USD 93.7 million in the previous corresponding period. The increase is due to total volume growth driven by organic growth and acquisitions.

• Despite the higher cost of sales which stood at 20.8 % as a percentage of revenue in Q3 2021, against 18.1% respectively in the pcp, the company recorded growth in gross profit at USD 145.6 million compared to USD 76.7 million in pcp.

• Operating profit scaled and stood at USD 39.5 million in the reported period compared to USD 15.9 million in pcp. The rise in operating profit was primarily due to higher revenues and higher gross profit.

• The Company posted a net profit of USD 28.0 million in Q3FY21, compared to a loss of USD 77.8 million in pcp. The transformation was primarily due to higher operating profit, coupled with lower finance costs, partially offset by higher income tax in the reported quarter.

Valuation Methodology (Illustrative): EV to EBITDA based

Analysis by Kalkine Group 

Stock recommendation

In Q3 2021, the company achieved several significant milestones, including financial results that exceeded expectations, the release of new innovative product solutions, the expansion of its portfolio of alternative payment methods ("APMs"), the announcement of several exciting new customers wins, and the completion of three acquisitions that increased the addressable market, product capabilities, and geographic footprint.

The firm continues to grow at a rapid pace and is well-positioned for long-term, profitable growth. It also raised its financial outlook for the full year 2021 and reaffirmed the previously disclosed medium and long-term growth plans, which is a significant plus. Therefore, based on the above rationale and valuation, we recommend a "Buy" at the closing price of CAD 67.43 as on February 25, 2022.  Additionally, the markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while investing.

One-Year Technical Price Chart (as on February 25, 2022). Source: REFINITIV, Analysis by Kalkine Group 

Technical Analysis Summary

Disclaimer

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