We feel now is a pretty good time to analyse EVO Payments, Inc.'s (NASDAQ:EVOP) business as it appears the company may be on the cusp of a considerable accomplishment. EVO Payments, Inc. operates as an integrated merchant acquirer and payment processor in the Americas and Europe. With the latest financial year loss of US$10m and a trailing-twelve-month loss of US$10m, the US$2.6b market-cap company amplified its loss by moving further away from its breakeven target. The most pressing concern for investors is EVO Payments' path to profitability – when will it breakeven? In this article, we will touch on the expectations for the company's growth and when analysts expect it to become profitable.
EVO Payments is bordering on breakeven, according to the 10 American IT analysts. They expect the company to post a final loss in 2020, before turning a profit of US$19m in 2021. Therefore, the company is expected to breakeven roughly 12 months from now or less. How fast will the company have to grow to reach the consensus forecasts that anticipate breakeven by 2021? Working backwards from analyst estimates, it turns out that they expect the company to grow 121% year-on-year, on average, which signals high confidence from analysts. Should the business grow at a slower rate, it will become profitable at a later date than expected.
Underlying developments driving EVO Payments' growth isn’t the focus of this broad overview, however, keep in mind that typically a high growth rate is not out of the ordinary, particularly when a company is in a period of investment.
One thing we would like to bring into light with EVO Payments is its debt-to-equity ratio of 192%. Typically, debt shouldn’t exceed 40% of your equity, which in this case, the company has significantly overshot. Note that a higher debt obligation increases the risk in investing in the loss-making company.
This article is not intended to be a comprehensive analysis on EVO Payments, so if you are interested in understanding the company at a deeper level, take a look at EVO Payments' company page on Simply Wall St. We've also compiled a list of important aspects you should further research:
- Valuation: What is EVO Payments worth today? Has the future growth potential already been factored into the price? The intrinsic value infographic in our free research report helps visualize whether EVO Payments is currently mispriced by the market.
- Management Team: An experienced management team on the helm increases our confidence in the business – take a look at who sits on EVO Payments’s board and the CEO’s background.
- Other High-Performing Stocks: Are there other stocks that provide better prospects with proven track records? Explore our free list of these great stocks here.
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What are the risks and opportunities for EVO Payments?
Trading at 31.8% below our estimate of its fair value
Earnings are forecast to grow 59.97% per year
Became profitable this year
Has a high level of debt
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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