PSFE stock: Seekingalpha.com article - Felix Fung

 

Summary

• The payment company is down over 85% from its high last January after going public through a SPAC merger.
• The company is already profitable but is struggling to grow its revenue despite online payment tailwinds.
• Its latest earnings report shows that revenue is still decelerating and is facing multiple headwinds on the FX and regulatory end.
• The company is a sell as valuations are still elevated compared to peers while growth is almost non-existent.

Investment Thesis

Paysafe (NYSE:PSFE) is a UK-based fintech company that provides payment services to customers that range from individuals to enterprises. It mainly operates in three segments, Integrated processing, Digital wallet, and Ecash solutions. The company went public early last year through a SPAC merger with Foley Trasimene Acquisition Corp, a blank check company founded by famous investor Bill Foley. The stock shot up to almost $20 initially due to the hype surrounding it then kept plummeting after de-SPAC. The stock is now trading at $2.48, down almost 90% from its all-time high last year. Despite the huge drop in price, I believe the stock is still a sell. The company recently reported its first-quarter result for FY22. It is EBITDA positive but is struggling to grow revenue while peers are still reporting growth. It is facing strong competition, regulatory and FX headwinds and the i-gaming segment appears to be overrated. Valuation is also high when compared to its peers which have better fundamentals and financials.

Valuation

Despite the huge drop in stock price, the company is still by no means cheap. At the current price of $2.48, it translates to an EV/EBITDA of 22.01. The number looks quite reasonable alone but when you factor in its growth and prospects it is actually quite expensive. From the chart below, it is also shown that the company's valuation is elevated compared to other payment companies like PayPal (PYPL) and Global Payments (GPN). All of the peers below are also growing quicker, PayPal, Global Payments, and Nuvei (NVEI) grew revenue by 7.46%, 8.35%, and 42.75% respectively despite the weakening macro environment. Not to mention that all of these companies have a much lower debt load. Paysafe's Net debt to LTM Adj. EBITDA is 5.6x while PayPal, Global Payments are only 2.9x, 0.4x and Nuvei has no net debt. All of these companies are a lot more attractive compared to Paysafe when considering growth, balance sheet, valuation, and fundamentals.