Digital Commerce And Banking Tech Will Unlock New Potential

Key Takeaways

• Growth in new verticals and digital-first commerce positions Tyro for expanded revenue and increased market share amid the cashless payments shift.
  
• Investments in AI, cloud technology, and core banking platform are set to boost operational efficiency, merchant adoption, and profit margins.
  
• Threats from merchant churn, SME exposure, digital disruption, and high competition may challenge Tyro's growth, margin stability, and core business relevance.

Catalysts

Engages in the provision of payment solutions and value-add services in Australia.

• Recent improvement in transaction volume growth, particularly in Q4 FY'25 and early FY'26, combined with significant market share opportunities in new verticals (pet insurance, aged care, automotive, unattended devices) positions Tyro to capitalize on the ongoing migration to cashless and digital-first commerce-supporting higher top-line revenue growth.
  
• Expansion of Tyro's value-added banking services and recent launch of a new core banking platform are likely to increase merchant adoption and deposit retention, driving a higher proportion of gross profit from banking and boosting net margins over time.
  
• Strong growth in high-potential verticals like health (15% TTV increase YOY) and low market share in many health sub-sectors point to substantial runway for customer acquisition and transaction value growth as omnichannel retail and commerce continue expanding, directly benefiting revenues.
  
• Accelerated investment in AI and cloud-based technology (improving customer support, productivity, and product innovation cycles) is set to deliver operational efficiency gains and margin expansion, further supporting earnings growth.
  
• Strategic POS and software integrations, enabling Tyro to serve both SME and larger merchants, and a broadening distribution network are likely to drive greater customer retention and average revenue per user, supporting stable or expanding EBITDA margins.

Tyro Payments Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Tyro Payments's revenue will grow by 6.3% annually over the next 3 years.
• Analysts assume that profit margins will increase from 3.7% today to 4.5% in 3 years time.
• Analysts expect earnings to reach A$26.4 million (and earnings per share of A$0.05) by about August 2028, up from A$17.8 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting A$33.7 million in earnings, and the most bearish expecting A$17.9 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 34.3x on those 2028 earnings, down from 35.3x today. This future PE is greater than the current PE for the AU Diversified Financial industry at 25.2x.
• Analysts expect the number of shares outstanding to grow by 0.92% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.18%, as per the Simply Wall St company report.

Tyro Payments Future Earnings Per Share Growth

Risks

• Persistent merchant churn due to ongoing business closures, particularly in discretionary sectors like hospitality and retail, may continue to dampen transaction volume growth and limit revenue expansion.
  
• Heightening competition, including from global payments players and fintechs with broader product sets, threatens Tyro's market share and may pressure margins as payments processing becomes increasingly commoditized.
  
• Tyro's reliance on SME merchants exposes revenue and earnings to elevated economic risk, as the SME segment is particularly vulnerable to macroeconomic downturns and digital disruption, potentially leading to reduced transaction volumes.
  
• The rapid evolution toward frictionless digital wallets, embedded payments, and mobile-first solutions could reduce the relevance of traditional POS terminals, undermining Tyro's core business and creating risks for both top-line growth and earnings stability.
  
• Ongoing investment in technology and compliance to keep pace with regulatory changes and industry innovation could lead to a persistently high cost base, compressing net margins despite efforts to drive operating efficiencies.

Valuation

• The analysts have a consensus price target of A$1.354 for Tyro Payments 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 A$1.7, and the most bearish reporting a price target of just A$0.82.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$583.9 million, earnings will come to A$26.4 million, and it would be trading on a PE ratio of 34.3x, assuming you use a discount rate of 7.2%.
  
• Given the current share price of A$1.19, the analyst price target of A$1.35 is 12.1% 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.