PaySign: Earnings Shoot Up
- PaySign’s revenue growth was almost flat until it started its upward trajectory in 2017.
- 2019 earnings jumped by a whopping 270% from the previous financial year.
- PaySign continues to execute its growth strategy.
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Know what you own, and know why you own it. - Peter Lynch
PaySign (NASDAQ:PAYS) surprised the market recently when profits increased by more than 40% from 2017 to 2018 and even surpassed that rate by six folds in 2019. PaySign, Inc. is an integrated payment processor and debit card program manager offering various services such as transaction processing, cardholder enrollment and account management, and value loading. The company offers customized payment solutions to various organizations including private corporations, government institutions, and universities. In the early years of operations, the company focused mainly on providing co-pay assistance prepaid cards to the pharmaceutical industry. In 2011, it began marketing corporate incentive prepaid card-based payment solutions targeting the plasma donation industry. By 2018, more resources were devoted to card programs in the pharmaceutical industry.
Figure 1. PaySign Share Price
PAYS’s revenue growth was almost flat until it started its upward trajectory in 2017. Annual growth rate was at the 20% mark in 2017, 40% in 2018, and 50% in 2019. The increase in revenue is mainly due to the growth in the company’s plasma programs and the new pharma business. These are not only a one-off increase as new onboarded plasma centers, and new cardholders will continue to generate revenue for the company. PAYS did not take profitability for granted in growing its business. 2019 earnings jumped by a whopping 270% from the previous financial year.
Figure 2. PaySign Revenue and Net Income (Quarterly)
Valuation And Price Forecast
Early holders of PAYS enjoy an 800% portfolio gain in less than two years. Does this mean it is too late to jump into the boat? Analysts say that at the current price level, PAYS is still undervalued. Fair value is estimated to be more than 30% the current price. 12-month analysts' price forecast also looks rosy. The low end of the forecast is still 50% higher than the current price. The median price is $15.50.
Figure 3. 12-Month Price Forecast
Source: CNN Money
Continued Growth Strategy
PAYS continues to execute its growth strategy. In 2019, the company started marketing its premier card, which is a debit card linked to a demand deposit account. Material benefit from the premier program is expected to be felt by 2020. The company is also making considerable progress in evaluating several opportunities in the M&A front. In addition, PaySign’s zero-debt balance sheet provides ample room to use leverage and further spur its growth.
For dividend-seeking investors, PAYS may not be the appropriate stock. PAYS has not paid dividends in the past and may still continue to withhold dividend declarations as it executes its growth strategy. With the sharp rise in earnings, the company may not be able to achieve the same level of profit growth in the succeeding years. PAYS's P/E ratio is also well above the industry and market average suggesting the possibility of cheaper alternative stocks.
Accurately predicting a company’s inflection point is synonymous to looking for a needle in a haystack. Fortunately, the gains last longer beyond that point. PaySign might have reached its true inflection point, and it is not yet too late to ride along. Investors can never go wrong with a profitable, growing company.
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