- Oops!Something went wrong.Please try again later.
While EVO Payments, Inc. (NASDAQ:EVOP) might not be the most widely known stock at the moment, it saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGM. As a mid-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s examine EVO Payments’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
Is EVO Payments still cheap?
According to my valuation model, EVO Payments seems to be fairly priced at around 3.31% above my intrinsic value, which means if you buy EVO Payments today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $28.74, there’s only an insignificant downside when the price falls to its real value. Although, there may be an opportunity to buy in the future. This is because EVO Payments’s beta (a measure of share price volatility) is high, meaning its price movements will be exaggerated relative to the rest of the market. If the market is bearish, the company’s shares will likely fall by more than the rest of the market, providing a prime buying opportunity.
What kind of growth will EVO Payments generate?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With revenues expected to grow by a double-digit 29% over the next couple of years, the outlook is positive for EVO Payments. If the level of expenses is able to be maintained, it looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has already priced in EVOP’s positive outlook, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on EVOP, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for the company, which means it’s worth further examining other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
So while earnings quality is important, it's equally important to consider the risks facing EVO Payments at this point in time. For example, we've discovered 1 warning sign that you should run your eye over to get a better picture of EVO Payments.
If you are no longer interested in EVO Payments, you can use our free platform to see our list of over 50 other stocks with a high growth potential.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.