A Windfall Could Await Investors in This Canadian Digital Payments Stock

Shares of Nuvei Corporation (TSX:NVEI) have climbed more than 54% since Capital Ideas wrote about the company about seven weeks ago

Capital Ideas Media | December 23, 2020 | SmallCapPower: COVID-19 has accelerated the growth rate of digital payments, as fewer people want to lay their hands on cash. According to market intelligence research firm Mordor Intelligence, the global digital payments market is expected to grow at a compound annual growth rate of 13.5% between 2020 and 2025.

(Originally published on Capital Ideas Media on October 27, 2020)

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Newly-listed Nuvei Corporation (TSX:NVEI), Canada’s largest private and non-bank payment processor,  helps businesses “remove payment barriers,” by optimizing operating costs and increasing acceptance rates, employing its proprietary secure technology to provide  clients with direct access to all major payment programs throughout the world.

[Editor’s Note: Shares of Nuvei have climbed more than 54% since Capital Ideas wrote about the company about seven weeks ago.]

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Nuvei currently has more than 50,000 customers, which includes gaming companies, financial services, and retailers.

The Company reported Fiscal 2019 revenue of US$245.8 million, up from US$149.7 million in 2018, with US$165.6 million generated during the first six months of 2020. Nuvei Corp. did record a loss of US$69.5 million in 2019, but swung to a profit of nearly US$14 million in the quarter ending June 30, 2020.

RBC Dominion Securities analyst Paul Treiber thinks Nuvei is “well positioned to remain dominant” as a leading provider of payment solutions in the online gaming market (he estimates the Company has seven of the 10 largest companies in that space as customers). The analyst also sees the increased legalization of online gambling at the U.S. state level as a potential catalyst for growth.

Mr. Treiber expects 16% compounded organic growth for the Company between Fiscal 2020 and 2023 and forecasts sustainable low 80% gross margins and low 40% adjusted EBITDA margins, allowing it realize 70% adjusted EBITDA to free cash flow conversion. He believes excess free cash flow will be used to make additional acquisitions in the payments space.

The RBC Dominion Securities analyst has an “Outperform” rating on NVEI stock with a US$50 per share target price, anticipating that high-growth verticals such as online retail, social gaming, and online marketplaces will contribute disproportionately to Nuvei’s organic growth.

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