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Euronet (EEFT) Up 96.1% in a Year: Will the Rally Continue?

Zacks Equity Research

Euronet Worldwide, Inc. EEFT has been in investors’ good books on the back of revenue growth and inorganic strategies.

In 2018, the company delivered revenues of $2.5 billion, up 12.6% year over year. It also established and extended various relationships, which in turn helped it strengthen position in the marketplace. Its EFT and Money Transfer segments have been performing well on increasing transactions.

In a year’s time, this Zacks Rank #2 (Buy) company has rallied 96.1%, outperforming the industry’s growth of 6.4%.

 



Its return on equity — a profitability measure — stands at 26.1%, higher than the industry's average of 22.4%.

The long-term growth rate of the company stands at 13.3%, which remains positive as it is above the industry's average of 9.5%.

We expect the momentum to continue as it gains from the following factors:

Consistent Revenue Growth: Euronet’s top-line improvement has been impressive, witnessing a CAGR of 12.4% during the 2013-2018 period on solid segmental results and the company’s diversity across products and geographies. The uptick in revenues continued in the first quarter of 2019, owing to solid contributions from EFT Processing and Money Transfer segments. With more products and services as well as new and exciting geographic options, Euronet is well-positioned to continue with strong growth rates going forward.

Expansion and Strategic Initiatives: The company’s growth strategy worked in its favor. It exited the first quarter of 2019 with 42034 ATMs, up 9.6% year over year. Several initiatives, such as the ATM network participation agreement with ING Bank in Spain, Remitly, Ripple, Alipay, etc. poise the company well for growth.

Strong Balance Sheet: Euronet’s solid balance sheet position also impresses. Its debt to equity ratio is 86.4%, comparing favorably with the industry’s 196.5%. Moreover, its cash and cash equivalents have been increasing from the past several years. The company has been successfully lowering its debt over the past couple of years. It also entered a new credit facility, which gives it more flexibility to deliver on its plans and enhance shareholder value.

Other Stocks to Consider

Investors interested in the same space might look into a few other top-ranked stocks like Visa Inc. V, Synchrony Financial SYF and AXA Equitable Holdings, Inc. EQH, each currently carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Visa works as a payments technology company. In the last four quarters, the company delivered average positive surprise of 5.4%.

Synchrony Financial works as a consumer financial services company in the United States. The company managed to pull off average trailing four-quarter positive surprise of 14.2%.

AXA Equitable works as a diversified financial services company worldwide. It recorded average four-quarter beat of 12.51%.

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