Optimizing Go-To-Market Capabilities Will Strengthen Future Business Performance

Key Takeaways

• Investments in global payment infrastructure and product innovation are expected to enhance gross margins and profitability by managing costs efficiently.
  
• Strategic focus on optimizing go-to-market capabilities and growth in travel and B2B verticals will support revenue and net margin improvements.
  
• Regulatory constraints in education and competitive travel payments market may challenge Flywire's revenue growth and profitability amidst downward gross margin pressures.

Catalysts

Operates as a payments enablement and software company in the United States and internationally.

• Flywire's plan to double its revenue over the next several years, partly through investments and business improvements, suggests strong future revenue growth potential.
  
• The company is enhancing its global payment infrastructure, which could lead to better gross margins and profitability by efficiently managing costs and expanding its client base.
  
• Flywire's strategic focus on optimizing go-to-market capabilities across verticals and regions is likely to support ongoing revenue and net margin improvements.
  
• Expanding its Flywire advantage through product and payment innovation positions the company for increased revenue and improved gross margins in the future.
  
• Despite challenges in the Canadian education market, Flywire expects strong growth in other verticals like travel and B2B, which can contribute significantly to revenue growth and net earnings.

Flywire Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Flywire's revenue will grow by 19.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 4.2% today to 12.4% in 3 years time.
• Analysts expect earnings to reach $100.7 million (and earnings per share of $0.71) by about February 2028, up from $20.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $132.8 million in earnings, and the most bearish expecting $39.2 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 38.3x on those 2028 earnings, down from 126.4x today. This future PE is greater than the current PE for the US Diversified Financial industry at 17.4x.
• Analysts expect the number of shares outstanding to grow by 1.29% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.69%, as per the Simply Wall St company report.

Flywire Future Earnings Per Share Growth

Risks

• Limitations on foreign students imposed by the Canadian government and potential actions by the Australian government pose a risk to Flywire's revenue growth in the education sector. (Revenue)
  
• The high single-digit percentage point headwind related to Flywire's Canadian higher education business has impacted overall revenue growth, indicating challenges in maintaining growth in key markets. (Revenue)
  
• The significant competitive environment within the travel payments space suggests challenges in maintaining Flywire's market share, which could affect long-term revenue growth and profitability. (Revenue)
  
• Mix shift towards faster-growing segments like travel and B2B, which have more prevalent credit card usage, puts downward pressure on Flywire's gross margins. (Net Margins)
  
• Despite the commitment to profitability and net income, the FX effects on Flywire's financial results demonstrate external risks that could impact earnings unpredictably. (Earnings)

Valuation

• The analysts have a consensus price target of $24.599 for Flywire based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $29.0, and the most bearish reporting a price target of just $20.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $811.3 million, earnings will come to $100.7 million, and it would be trading on a PE ratio of 38.3x, assuming you use a discount rate of 6.7%.
  
• Given the current share price of $20.4, the analyst price target of $24.6 is 17.1% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.