Unveiling Euronet Worldwide (EEFT)'s Value: Is It Really Priced Right? A Comprehensive Guide
Euronet Worldwide Inc (NASDAQ:EEFT) has recently seen a daily gain of 7.19%, despite a 3-month loss of -28.27%. With an Earnings Per Share (EPS) of 5.23, the question arises - is the stock significantly undervalued? This article intends to answer that question and provide a thorough valuation analysis of Euronet Worldwide. We invite you to continue reading for a comprehensive assessment of the company's value.
Company Introduction
Euronet Worldwide Inc operates as a provider of electronic financial transaction solutions. The company's network spans across Europe, offering an independent network of ATMs, a network for prepaid products such as mobile top-ups, and processing point-of-sale transactions. Euronet Worldwide also offers global money transfers, payment services and software, banking services, credit and debit card outsourcing services, and card issuing and merchant acquiring services. The company's largest segment by operating income, electronical financial transaction processing, mainly generates revenue from monthly ATM management fees and currency conversion transactions. The largest country by revenue is the United States of America.
With a current stock price of $82.48, it's essential to compare this with the company's GF Value, an estimation of fair value. This comparison will pave the way for a more profound exploration of the company's value, ingeniously integrating financial assessment with essential company details.
Understanding the GF Value
The GF Value is a proprietary measure of a stock's intrinsic value, computed considering historical trading multiples, a GuruFocus adjustment factor based on past performance and growth, and future business performance estimates. The GF Value Line denotes the stock's ideal fair trading value.
According to GuruFocus' valuation method, the stock of Euronet Worldwide (NASDAQ:EEFT) is significantly undervalued. The GF Value estimates the stock's fair value based on three key factors: historical multiples, an internal adjustment based on the company's past business growth, and analyst estimates of future business performance. If the share price is significantly above the GF Value Line, the stock may be overvalued and have poor future returns. On the other hand, if the share price is significantly below the GF Value calculation, the stock may be undervalued and have higher future returns. At its current price of $ 82.48 per share, Euronet Worldwide stock is estimated to be significantly undervalued.
Because Euronet Worldwide is significantly undervalued, the long-term return of its stock is likely to be much higher than its business growth.
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Financial Strength
Companies with poor financial strength offer investors a high risk of permanent capital loss. To avoid this, an investor must do their research and review a company's financial strength before deciding to purchase shares. Both the cash-to-debt ratio and interest coverage of a company are a great way to understand its financial strength. Euronet Worldwide has a cash-to-debt ratio of 1, which ranks worse than 65.25% of 2734 companies in the Software industry. The overall financial strength of Euronet Worldwide is 6 out of 10, which indicates that the financial strength of Euronet Worldwide is fair.
Profitability and Growth
Investing in profitable companies, especially those that have demonstrated consistent profitability over the long term, poses less risk. A company with high profit margins is also typically a safer investment than one with low profit margins. Euronet Worldwide has been profitable 9 over the past 10 years. Over the past twelve months, the company had a revenue of $3.50 billion and Earnings Per Share (EPS) of $5.23. Its operating margin is 11.8%, which ranks better than 76.03% of 2762 companies in the Software industry. Overall, GuruFocus ranks the profitability of Euronet Worldwide at 8 out of 10, which indicates strong profitability.
Growth is probably one of the most important factors in the valuation of a company. GuruFocus' research has found that growth is closely correlated with the long-term performance of a company's stock. If a company's business is growing, the company usually creates value for its shareholders, especially if the growth is profitable. Conversely, if a company's revenue and earnings are declining, the value of the company will decrease. Euronet Worldwide's 3-year average revenue growth rate is worse than 51.19% of 2395 companies in the Software industry. Euronet Worldwide's 3-year average EBITDA growth rate is -4.5%, which ranks worse than 69.86% of 1991 companies in the Software industry.
ROIC vs WACC
Another way to evaluate a company's profitability is to compare its return on invested capital (ROIC) to its weighted cost of capital (WACC). Return on invested capital (ROIC) measures how well a company generates cash flow relative to the capital it has invested in its business. The weighted average cost of capital (WACC) is the rate that a company is expected to pay on average to all its security holders to finance its assets. If the ROIC is higher than the WACC, it indicates that the company is creating value for shareholders. Over the past 12 months, Euronet Worldwide's ROIC was 9.4, while its WACC came in at 9.41.
Conclusion
Overall, Euronet Worldwide (NASDAQ:EEFT) stock is estimated to be significantly undervalued. The company's financial condition is fair, and its profitability is strong. Its growth ranks worse than 69.86% of 1991 companies in the Software industry. To learn more about Euronet Worldwide stock, you can check out its 30-Year Financials here.
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This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
This article first appeared on GuruFocus.
