Euronet Worldwide – Unfairly Tarred by the Macro-Environment
Euronet Worldwide – Unfairly Tarred by the Macro-Environment
Euronet Worldwide, Inc.[NDQ:EEFT – May 7,2010 close: $15.24]is an electronic payments provider. They offer payment and transaction processing and distribution solutions to financial institutions, retailers, service providers and individual consumers. Primary product offerings include automated teller machine (ATM), point-of-sale (POS) and card outsourcing services; electronic distribution of prepaid mobile airtime and other prepaid products, and global consumer money transfer services.
Despite the weakness in global economies EEFT posted all-time high year-over-year revenues in each of the past two quarters while showing positive earnings versus losses (due to non-recurring charge-offs) in the previous year’s interims.
Euronet Worldwide has previously always traded at a premium multiple to both earnings and book value. Here are its per share numbers (including non-recurring items) as reported by Value Line:
|
Year |
Sales |
C/F |
EPS |
Avg. P/E |
B/V |
Avg. P/BV |
52-Wk Range |
|
2003 |
6.92 |
0.42 |
0.01 |
NMF |
2.77 |
4.5x |
6.11 – 18.50 |
|
2004 |
11.50 |
1.03 |
0.55 |
36.7x |
4.28 |
4.9x |
15.49 – 27.00 |
|
2005 |
14.85 |
1.41 |
0.75 |
36.9x |
5.77 |
4.7x |
22.90 – 31.97 |
|
2006 |
16.81 |
2.01 |
1.17 |
26.9x |
7.70 |
3.7x |
23.34 –39.78 |
|
2007 |
18.74 |
2.07 |
1.10 |
25.8x |
14.79 |
2.0x |
24.64 – 33.25 |
|
2008* |
20.76 |
d2.55 |
d3.78 |
NMF |
9.11 |
2.1x |
6.87 –30.57 |
|
2009* |
20.30 |
1.69 |
0.58 |
31.0x |
10.99 |
1.5x |
7.57 – 25.30 |
* 2008 and 2009 data include non-recurring items
Q1 raw numbers were a gain of $0.05 against a $0.23 deficit but the non-GAAP figure was $0.32 and management stated they see $0.31 as likely for Q2. Standard and Poors now carries full year estimates of $1.32 and $1.47 for 2010 and 2011- both of which would represent record high EPS.
At last week’s closing quote of $15.24 EEFT shares were offered at about 11.6x this year’s and under 10.4x the 2011 consensus estimate. Those are extremely low by all historical standards. A rebound to even 15x expected 2010 EPS would bring EEFT back to close to $20 per share.
Their price/book value relationship is similarly cheap. Excepting last year’s panic market Euronet shares have traded between 2x -4.9x book value. With book value now about $11 /share that could easily support a $20+ price target.
Are those $20 goal prices realistic? Why not? EEFT changed hands above $20 during each of the calendar years since 2004 (including this year) and fundamentals are looking stronger than ever before. Standard and Poors sees present day ‘Fair Value’ as $19.10 in their latest report on EEFT.
As Europe gets back to normal Euronet’s revenues and earnings should continue their growth and the share price should recover to more normal valuation levels.
Dr. Paul Price –
Disclosure: None
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Whistler Blowers, Insiders
Euronet Worldwide – Unfairly Tarred by the Macro-Environment
by Dr. Paul Price
Having good insight knowledge about EEFT as senior manager I don’t share Dr. Paul Price view at all. EEFT has major management problems and un integrated legacy which will have negative impact on performance ahead.