Paymentus Holdings Inc Paving Way for Future of Digital Payments

PAY Stock: Mid-Cap Fintech Play in High-Volume Market

One of the top growth areas in the financial technology (fintech) space is the electronic bill presentment and payment (EBPP) market. This involves bills being generated, delivered, and paid online. It has become the norm to pay bills via this route, and its usage is expected to accelerate.

The global EBPP market could scale up to 30.7 billion bills by 2027, compared to 18.2 billion in 2020. (Source: “Global Electronic Bill Presentment and Payment (EBPP) Market Report 2021,” Business Wire, April 9, 2021.)

While this estimate is positive, it may be too conservative.

A compelling play on the EBPP market is Paymentus Holdings Inc (NYSE:PAY). The company provides a cloud-based bill payment technology used by utilities, financial services, insurance firms, governments, telecommunications, and health-care providers.

Selling for about 30% less than its post-May initial public offering (IPO) price, Paymentus stock is worth a look. Investors should keep an eye on it for the next few weeks as the stock nears its lockup expiry. That’s when PAY stock’s initial investors will be able to sell their shares, so there’s some risk.

The following chart shows Paymentus stock in an uptrend and recovering its 50-day moving average.

Chart courtesy of StockCharts.com

Next up will be resistance at $30.00, followed by $37.00.

My view is that the impact of the lockup expiry will likely be minimal because of PAY stock’s current discount. Moreover, most of Paymentus stock’s early investors are institutions, so I don’t expect a mass exodus.

Strong Revenue Growth Bodes Well for PAY Stock

Since Paymentus Holdings Inc only went public in May, its publicly reported financial results are limited, but so far, the numbers have been positive.

In 2020, the company’s revenues came in at $301.8 million, up by 28% from $235.8 million in 2019. (Source: “Paymentus Holdings Inc.” MarketWatch, last accessed November 10, 2021.)

In 2019 and 2020, Paymentus Holdings Inc produced earnings before interest, taxes, depreciation, and amortization (EBITDA) of $24.5 million and $29.3 million, respectively.

Also in 2019 and 2020, the company’s profits based on generally accepted accounting principles (GAAP) came in at $0.08 and $0.07 per diluted share, respectively.

Moreover, in 2019 and 2020, Paymentus Holdings Inc generated free cash flow of $16.5 million and $37.8 million, respectively.

The second quarter of 2021 saw Paymentus report revenue growth of 30.3% to $93.5 million. (Source: “Paymentus Reports Second Quarter 2021 Financial Results,” Paymentus Holdings Inc, August 10, 2021.)

The company processed more than 64 million bills in the second quarter, up by 39% compared to the same quarter in 2020.

A look at the company’s current financial condition points to $269.7 million in working capital, $12.6 million in debt, and $266.4 million in cash. (Source: Paymentus Holdings, Inc. (PAY),” Yahoo! Finance, last accessed November 10, 2021.)

Paymentus Holdings Inc’s revenue growth is expected to continue in the double-digits. Analysts expect the company’s revenues to grow by 25% to $379.5 million this year and by 24.6% to $472.7 million in 2022. (Source: Ibid.)

That represents an excellent compound annual growth rate (CAGR) of 26%.

On an adjusted basis, Paymentus Holdings Inc is expected to report profits of $0.03 per diluted share this year and $0.07 per diluted share in 2022. Those estimates appear conservative. There are also high estimates of $0.11 and $0.13 per diluted share for 2021 and 2022, respectively.

Analyst Take

Paymentus Holdings Inc is firmly supported by institutional investors, with 72 institutions holding the majority of Paymentus stock. (Source: Ibid.)

PAY stock isn’t cheap, but it’s priced for growth. Paymentus trades at 6.5 times its consensus 2022 revenue estimate.