EVERTEC, Inc. (EVTC) is based in San Juan, Puerto Rico. The Company provides a range of merchant acquiring, payment processing and business process management services. The Company operates through three segments: merchant acquiring, payment processing and commerce solutions. By comparison, Usio, Inc. (USIO) in San Antonio, Texas, is a payment processing company that provides integrated payment processing services to merchants and businesses, including automated clearinghouses, processing, credit, prepaid cards and debit card processing. services.
Digital payments were accelerating with the widespread use of smartphones and the growing popularity of e-commerce, but the COVID-19 pandemic has accelerated the adoption of contactless and digital payments due to restriction-induced economic changes. Digital payments can be categorized into browser-based payments, in-app purchases, and in-store payment using a mobile phone or QR code. According to a report by ResearchandMarkets.com, the global digital payments market is expected to grow at a CAGR of 10.9% to reach $12.55 trillion by 2027. The rapid growth of digital payments will benefit digital payment companies such than EVTC and USIO.
EVTC stock is down 0.8% over the past nine months, while USIO has gained 50.4%. EVTC has gained 1.6% over the past year, compared to a decline of 56.9% for USIO.
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On February 24, 2022, EVTC announced that it had agreed to acquire 100% of the outstanding shares of Chilean payment solutions and enterprise technology company BBR SpA. EVTC President and CEO Mac Schuessler said, “The acquisition of BBR complements our existing technology and product portfolio in Chile and opens the Peruvian market to Evertec. With this acquisition, we continue to expand our footprint and solidify our position as the leader in payment processing in Latin America. »
On December 7, 2021, USIO announced that it had extended an exclusive agreement for three years to provide automated clearing house payment solutions to leading cryptocurrency platform Voyager Digital. USIO President and CEO Louis Hoch said, “We are pleased to announce a three-year extension to this exclusive agreement. This remains the foundation of our growing relationship with Voyager which now includes our role as program manager and processor for their newly introduced debit card, as well as the integration of Voyager’s technology into our card processing solutions to enable merchants that USIO serves to accept cryptocurrency as a form. payment in person, online, by electronic invoice and by SMS, among others.
Recent financial results
EVTC’s revenue increased 15.6% year-on-year to $155.23 million for its fourth quarter ended December 31, 2021. The company’s operating income increased 28% year-on-year to reach $50.20 million. Additionally, its net profit rose 27.2% year-over-year to $41.18 million. Additionally, its EPS came in at $0.56, representing a 27.2% year-over-year increase.
USIO’s revenue increased 85.7% year over year to $17.42 million for the fourth quarter ended December 31, 2021. The company’s net income decreased by 74.6 % year over year to reach $38,810. Additionally, its adjusted EBITDA increased 392.5% year-over-year to $1.25 million. Additionally, its total operating expenses increased 46.6% year-over-year to $4.56 million.
Past and expected financial performance
EVTC’s revenues and total assets have grown at CAGRs of 9.1% and 7.2%, respectively, over the past three years. Analysts expect EVTC’s revenue to grow 1.4% in the current year and 5.1% next year. The company’s EPS is expected to decline 8% in the current year and grow 8.3% next year. Additionally, its EPS is expected to grow at a rate of 14.1% per year over the next five years.
USIO’s revenues and total assets have grown at CAGRs of 35.2% and 25.1%, respectively, over the past three years. Analysts expect the company’s revenue to grow 18.2% in the current year and 15.7% next year. The company’s EPS is expected to increase 150% in the current year and 900% next year.
EVTC’s revenues over the last 12 months are 9.5 times greater than those generated by USIO. EVTC is also more profitable, with gross profit and EBITDA margins of 57.58% and 41.64%, respectively, compared to 25.24% and 4.02% for USIO.
Additionally, USIO’s ROCE, ROC and ROA are negative compared to EVTC’s respective 40.08%, 13.19% and 14.08%.
In non-GAAP forward P/E terms, USIO is currently trading at 140x, 755.7% higher than EVTC’s 16.36x. Additionally, USIO’s forward EV/EBIT ratio of 91.82x is 403.6% higher than EVTC’s of 18.23x.
Thus, EVTC is more affordable.
EVTC has an overall B rating which equates to a buy in our proprietary POWR rating system. In contrast, USIO has an overall C rating, which translates to Neutral. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
EVTC has a B rating for stability, which is in line with its 0.99 beta. By comparison, USIO has a C rating for stability. It is justified, because it has a beta of 1.65.
Also, EVTC has a B rating for quality. This is justified given its 20.4% leveraged FCF margin, higher than the industry average of 10.2%. By comparison, the USIO’s 2.6% 12-month leveraged FCF margin is 74.3% below the industry average of 10.2% and in line with its C-grade.
Among 112 stocks in the financial services (corporate) sector, EVTC is ranked #17. In comparison, USIO is ranked #43.
Beyond what I said above, we also rated stocks for growth, value, momentum and sentiment. Click here to see all EVTC reviews. Also get all USIO odds here.
The growing popularity and acceptance of digital payments bodes well for EVTC and USIO. While EVTC and USIO are both expected to win, we believe it is best to bet on EVTC now due to its lower valuation, higher profitability and strong financials.
Our research shows that the odds of success increase when investing in stocks with an overall strong buy or buy rating. Check out all the other top-rated stocks in the financial services (corporate) sector here.
EVTC shares were trading at $41.29 per share on Wednesday afternoon, up $0.09 (+0.22%). Year-to-date, the EVTC is down -17.29%, compared to a -5.80% rise in the benchmark S&P 500 over the same period.
About the Author: Dipanjan Banchur
Ever since he was in elementary school, Dipanjan had been interested in the stock market. This enabled him to obtain a master’s degree in finance and accounting. Currently, as an investment analyst and financial journalist, Dipanjan is particularly interested in reading and analyzing emerging trends in financial markets. After…