Here's Why You Should Add Euronet (EEFT) to Your Portfolio
Euronet Worldwide, Inc. EEFT is well-poised for growth on the back of solid segmental performances, strategic expansion and a sturdy balance sheet. Over the past 60 days, the stock has witnessed its earnings estimates for 2020 and 2021 being revised upward 12.3% and 9.5% upward, respectively, reflecting analysts' optimism on the stock.
Its return on equity — a profitable measure — stands at 26.3%, higher than its industry's average of 21%.
Euronet’s top-line improvement over the past several years has remained quite impressive, which is evident from its 2015-2019 CAGR of 11.6%. This upside can be attributed to solid segmental results and diversity across products and geographies. Its top line looks to get an impetus from a slew of products and service launches as well as new and exciting geographical options.
The company’s Money Transfer Segment is consistently delivering growth for the physical and digital distribution channels, acquisitions, etc. In the first quarter of 2020, the segment contributed to around 46% of the company’s overall revenues. As of Mar 31, the Money Transfer network reached around 402,000 locations, up 7% year over year. The segment’s transaction in the first quarter grew on international remittances and digital transactions. Management expects to launch Ria Money Transfer mobile app in 19 new markets during the second quarter.
In May, the company’s subsidiary Ria Money Transfer unveiled Ria Money Transfer App for the European market. Ria Money has been partnering with several agents so that customers can enjoy a hassle-free omnichannel experience. The unit has been expanding owing to strategic alliances, evident from its 5% ownership interest in the international remittance market during 2019.
Additionally, Euronet’s EFT segment has been witnessing solid growth, driven by its steady focus on deploying more devices in the extended markets and its ability to develop an advanced technology for new products on both ATMs and POS terminals to optimize and enrich the customer experience. In the first quarter, the segment contributed to 25% of the total revenues. For the second quarter, the company expects 40% of the prior-year quarter’s revenue generation from this segment.
The company's balance sheet position remains strong. Total debt is 113.2% of its total equity (almost in line sequentially), significantly lower than the industry average of 181%. Moreover, its times interest earned stands at 11.4X (matching the sequential figure), substantially better than the industry average of 5.2X. Its cash and cash equivalents have been increasing from the past several years, skyrocketing 104.2% year over year in 2019. As of Mar 31, 2020, it has cash and cash equivalents worth $709.5 million, ATM cash at $558.6 million and a credit facility of $950 million. Together, its cash and credit facility surpasses its long-term debt of $1.1 billion. The company doesn’t have any massive debt-servicing obligations for the next five years. Thus, its solvency level appears encouraging.
Shares of this presently Zacks Rank #1 (Strong Buy) have gained 6.4% in three months’ time, underperforming its industry’s growth of 14.8%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Other companies in the same space, such as Jefferies Financial Group Inc. JEF, WEX Inc. WEX and Synchrony Financial SYF have gained 10.9%, 28.5% and 28.2% in the same time frame.
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