Patient Affordability And SaaS Entry Will Promise Success With Risks

Key Takeaways

• Acquisition of Gamma Innovation LLC expands Paysign into high-margin SaaS market, boosting potential revenue through integrated plasma and pharmaceutical solutions.
  
• Strong patient affordability segment growth, debt-free status, and cash reserves position Paysign well for future opportunities and market stability.
  
• Excess inventory and reduced demand in the plasma segment, coupled with integration uncertainties and rising expenses, could pressure Paysign’s revenue and margins.

Catalysts

Provides prepaid card programs, comprehensive patient affordability offerings, digital banking services, and integrated payment processing services for businesses, consumers, and government institutions.

• The significant growth in the patient affordability segment, which saw a 212% year-over-year revenue increase in 2024, with projections to at least double again in 2025, suggests continued strong revenue growth from this high-margin business segment.
  
• The acquisition of Gamma Innovation LLC positions Paysign to enter the high-margin Software-as-a-Service market, enhancing its total addressable market and providing opportunities for revenue growth through integrated solutions in the plasma and pharmaceutical sectors.
  
• The company’s expansion strategy, particularly the opening of additional plasma centers from existing clients, despite current challenges in the plasma market, could support long-term revenue stability and growth as market conditions improve.
  
• Expected improvements in gross profit margins, projected to rise to between 62% and 64% in 2025, reflect an increased revenue contribution from the pharma patient affordability business, which is positively impacting net margins.
  
• The absence of debt and significant cash reserves provide Paysign with financial flexibility to navigate current market challenges and potentially capitalize on new investment opportunities, supporting future earnings growth.

Paysign Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Paysign's revenue will grow by 15.6% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 6.5% today to 0.0% in 3 years time.
• Analysts expect earnings to reach $11.4 thousand (and earnings per share of $-0.0) by about April 2028, down from $3.8 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 36331.4x on those 2028 earnings, up from 29.4x today. This future PE is greater than the current PE for the US Diversified Financial industry at 14.5x.
• Analysts expect the number of shares outstanding to grow by 1.45% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.85%, as per the Simply Wall St company report.

Paysign Future Earnings Per Share Growth

Risks

• The slowdown in the plasma business due to excess inventory and reduced demand from fractionators could significantly impact Paysign's revenue from this segment, which makes up a substantial part of their total revenue.
  
• Maintaining and expanding the number of plasma centers in an oversupplied market could be challenging, affecting the potential growth of their plasma segment earnings and stretching operational resources.
  
• The recent Gamma acquisition, while strategic, comes with uncertainties related to integration and realization of anticipated synergies, which could impact net margins if not effectively managed.
  
• The increase in operating expenses driven by significant investments in IT and personnel to support growth could pressure net margins, especially if revenue growth does not meet expectations.
  
• The dependency on the pharmaceutical business' seasonality, particularly the strong first quarter followed by potential declines, could lead to revenue volatility and affect Paysign’s overall earnings predictability.

Valuation

• The analysts have a consensus price target of $6.05 for Paysign 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 $7.25, and the most bearish reporting a price target of just $5.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $90.3 million, earnings will come to $11.4 thousand, and it would be trading on a PE ratio of 36331.4x, assuming you use a discount rate of 6.9%.
• Given the current share price of $2.09, the analyst price target of $6.05 is 65.5% higher. Despite analysts expecting the underlying buisness to decline, they seem to believe it's more valuable than what the market thinks.
• 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.