The attention these two are commanding is well deserved. Year to date, both Lightspeed and Shopify are sitting on gains of approximately 30% and since Lightspeed has gone public in mid-2019, they have both been among the best stocks to own with gains north of 500%.
Should Nuvei Corporation (TSE:NVEI) be part of the conversation?
One company that hasn’t received nearly as much attention in the space is Nuvei Corporation (TSE:NVEI), which went public in September of 2020. NVEI is another fintech company that provides payment technology solutions to merchants and partners.
On Tuesday, NVEI posted blow out second quarter results in which it beat on the top and bottom lines. Earnings of US$0.44 beat by US$0.09 and revenue of US$178.2M beat by $20.41M.
Adding to the positive news, Nuvei also raised full year guidance:
The strong showing was enough to send its shares soaring up 15.03% on the day of earnings. Since the company went public it is sitting on gains of 164%, while just shy of Lightspeed's (+164%) performance, it has outpaced Shopify (55.33%) over the same period.
Are people looking beyond all-time highs?
Important note, especially for those just learning how to buy stocks, that looking well beyond stats that are often the most visible such as "price change" is critical when looking at any potential investment.
In this case, despite hitting all-time highs, there is still plenty to like about this company.
For starters, the company has clear targets in which it expects to grow revenue at a compound annual growth rate (CAGR) over the medium term. While medium term has not been defined, typically this means ~2-3 years time.
30%+ CAGR in the medium term
30%+ CAGR in the medium term
Adjusted EBITDA margin
50%+ over the long term
If the company’s recent performance is any indication, this is likely to be on the low end. Nuvei has reported quarterly results four times since going public. In each instance, it handily beat on both earnings and revenue estimates.
Another unique aspect of the company is that it's profitable. Not many high growth fintech companies can lay claim to consistent profitability. Case in point, it took years for Shopify to get into the black and Lightspeed has yet to achieve consistent profitability.
Nuvei is profitable and is expected to be for years to come. Worth noting and something that gets lost amidst the tech hype and the fact that the company is a recently new IPO, Nuvei is not a startup. Nuvei was a more mature company than both Lightspeed and Shopify when they went public.
What about valuation?
After the recent run up, how does Nuvei’s valuation compare? It now has similar valuations to Canada’s hottest tech stocks. It is trading at 17.2 times forward sales, whereas LSPD and SHOP are trading at 17.4 and 30.89 times respectively.
At this point, I’d consider Nuvei fairly valued. While I would not go chasing it, this fintech is worthy of investors attention on any meaningful pullback.
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