EEFT Stock Study (7-29-24)

Posted by Mark on September 16, 2024 at 06:27 | Last modified: July 29, 2024 11:11

I recently did a stock study on Euronet Worldwide Inc. (EEFT) with a closing price of $100.01.

M* writes:

     > Euronet Worldwide Inc is a provider of electronic financial
     > transaction solutions. The company operates an independent network
     > of ATMs in Europe, along with a network for prepaid products such
     > as mobile top-ups, and processes point-of-sale transactions. It
     > operates in three segment EFT Processing Segment, epay Segment,
     > and Money Transfer Segment. Its segment revenue comes from by
     > [sic] operating income, electronical [sic] financial transaction
     > processing, mainly generates revenue from monthly ATM management
     > fees and currency conversion transactions. It generates the majority
     > if [sic] its geographic revenue from the United States of America.

Over the past 10 years (2020 excluded for the full analysis due to COVID-19), this medium-size company has grown sales and EPS at annualized rates of 9.2% and 7.7%, respectively. Lines are mostly up but [EPS is] not very straight or consequently parallel due to declines in ’15, ’17, and ’21. Five- and 10-year EPS R^2 are 0.00 and 0.19, respectively, and Value Line gives an Earnings Predictability score of 40. Sales, however, is a consistent upward march.

Visual inspection was initially a failure to me but excluding ’20, I can strain to accept it. A case can also be made to exclude ’21 due to COVID-19 recovery, which would improve the visual even further.

Over the past decade, PTPM leads peer averages but trails the industry while ranging from 4.5% in ’21 to 15.8% in ’19 with a last-5-year mean of 10.2%. ROE also leads peer averages but trails the industry despite increasing from 13.5% (’14) to 22.0% (’23) with a last-5-year mean of 17.9%. Debt-to-Capital is a bit higher than industry averages but lower than peers while increasing from 36.8% (’14) to 61.7% (’23) with a last-5-year mean of 55.4%.

M* reports Quick Ratio of 0.76, Interest Coverage of 7.7, and assigns a Narrow [quantitative] Economic Moat. Value Line gives a B++ grade for Financial Strength.

With regard to sales growth:

• YF projects YOY 7.3% and 8.2% for ’24 and ’25, respectively (based on 8 analysts).
• Zacks projects YOY 6.2% and 8.1% for ’24 and ’25, respectively (2 analysts).
• Value Line projects 8.9% annualized growth from ’23-’28.
• CFRA reports ACE 7.3% YOY and 7.8% per year for ’24 and ’23-’25, respectively (9).

My 6.0% per year forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 14.9% and 14.2% per year for ’23-’25 and ’23-’26, respectively (based on 11 analysts).
• Nasdaq.com projects growth of 12.4% YOY for ’25 (3 analysts).
• YF projects YOY 15.7% and 12.6% for ’24 and ’25, respectively (8), along with 5-year annualized growth of 15.0%.
• Zacks projects YOY 16.2% and 12.1% for ’24 and ’25, respectively (3).
• Value Line projects 11.4% annualized growth from ’23-’28.
• CFRA reports ACE 57.8% YOY and 33.1% per year for ’24 and ’23-’25, respectively (10).

Whether the CFRA disconnect has longer-term implications, my 9.0% per year forecast is below both long-term estimates (mean 13.2%). Initial value is ’23 EPS of $5.50/share rather than 2024 Q2 EPS of $5.76 (annualized).

My Forecast High P/E is 22.0. Over the past decade, high P/E falls from 31.5 (’14) to 22.1 (’23) with a last-5-year mean (also excluding 126 in ’21) of 27.7 and a last-5-year-mean average P/E (also excluding 76.2 low P/E in ’21) of 21.3. I am below the 10-year range.

My Forecast Low P/E is 13.0. Over the past decade, low P/E falls from 19.0 (’14) to 13.4 (’23) with a last-5-year mean (also excluding 126 in ’21) of 15.0. I am forecasting below the range.

My LSPF is default $71.50 based on initial value given above. This is 28.5% less than the previous close and 3.1% less than the 52-week low.

These inputs land EEFT in the HOLD zone with a U/D ratio of 3.0. Total Annualized Return (TAR) is 13.2%.

PAR (using Forecast Average—not High—P/E) of 8.1% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 17 studies (my study and 6 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.0%, 12.1%, 25.9, and 14.4, respectively. I am lower across the board. Value Line’s projected average annual P/E of 23.5 is higher than MS (20.2) and higher than mine (17.5).

MS high / low EPS are $10.13 / $5.68 versus my $8.46 / $5.50 (per share). My high EPS is less due to a lower growth rate. Value Line’s high EPS of $9.45 is in the middle.

MS LSPF of $80.50 implies a Forecast Low P/E of 14.2: less than the above-stated 14.4. MS LSPF is 1.6% less than the default $5.68/share * 14.4 = $81.79 resulting in more conservative zoning. MS LSPF is 12.6% greater than mine, however.

With regard to valuation, PEG is 1.8 per my projected P/E: slightly elevated. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.82.

MOS is robust because my inputs are below respective analyst/historical ranges and MS averages. Comparison with the latter carries less impact due to such a low sample size, but MS TAR of 19.7% is anecdotally 6.5% per year greater than mine.

Per U/D, EEFT is a BUY under $100/share. BI TAR criterion is met < $93/share given a forecast high price ~$186.

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