With 137.8% predicted earnings growth over the next year Paysafe Group Plc (LSE:PAYS) seems to be a well performing company. What are the important facts you need to know? I’m going to look at the latest data and analyse this growth stock in more detail. See our latest analysis for PAYS
Can we expect PAYS to keep growing?
Paysafe Group’s extremely high growth potential is attracting investors. Depending on who you listen to the expectations are extremely bullish with analysts estimating the EPS to go from $0.15 to $0.33 over the next 3-5 years.
In the same period we are supposed to see the revenue grow from $871 Million to $1,326 Million in 2019 and net income is predicted to catapult from $70 M to $290 M in 2019, roughly growing 4.2x. Margins are expected to be extremely healthy during this time as well.
Basis for the growthPaysafe Group has grown its earnings faster than the Software industry average over the past year.
Paysafe Group’s Return on Equity of 6.8% leaves a lot to be desired and to make things worse this is below the industry average of 14.37%. The good news is that a slight improvement is on the cards with the level in a couple years rising to 17.2%.
Return on equity (ROE) is a measure of how much profit (net income) a company makes as a percentage of the shareholders equity. Equity is made up of funds from the original issuing of shares and any retained earnings from previous financial years. It varies considerably across sectors, for this reason it is important to asses a stocks ROE relative to its industry. Whilst it is true that the higher the ROE the better the company is performing, ROE does have a weakness. A stock with a disproportionate amount of debt can lead to a small equity base. Thus, a small amount of net income (the numerator) could still produce a high ROE off a modest equity base (the denominator). For this reason investors should always consider the debt situation in conjunction with ROE.
Paysafe Group is a fast growing company, but as Warren Buffett’s right-hand man Charlie Munger said, “No matter how wonderful a business is, it’s not worth an infinite price“. Is PAYS overpriced? Or could it be considered an undervalued opportunity? I recommend you see our latest FREE analysis to find out!
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