EVERTEC, Inc. (EVTC) in San Juan, Puerto Rico, is in the transaction processing company. The company operates through four segments: Payment Services – Puerto Rico and the Caribbean; Payment services – Latin America; Merchant acquirer; and Business Solutions. In comparison, Atlanta, Georgia Headquarters Global Payments Inc. (GPN) provides payment technologies and software solutions for card, electronic, check and digital payments. The company operates through three segments: Merchant Solutions; Solutions to issuers; and Business and Consumer Solutions.
The COVID-19 pandemic has led to a massive increase in e-commerce sales, increasing the need for payment processing solutions. Additionally, with the growing consumer demand for contactless delivery and payments, the demand for payment technology solutions is increasing dramatically. Payment Processing Solutions Market Expected to Record a CAGR of about 10.2% over the period 2021 – 2026. Given the accelerated adoption of digital payment methods, EVTC and GPN are expected to benefit.
EVTC has gained 20% in price over the past six months, while GPN has lost 23.9% over the period. Additionally, EVTC’s 15.8% gains year-to-date compares with GPN’s 23.9% drop. In terms of last year’s performance, EVTC is the big winner with 33.3% gains compared to 6.7% for GPN.
But which stock is a better buy now? Let’s find out.
On September 8, GPN reached an agreement to purchase MineralTree, a leading provider of accounts payable and business-to-business (B2B) payment automation solutions. This acquisition should improve its B2B product line and allow the company to better serve its customers.
On August 11, EVTC announced that S&P Global Ratings had upgraded the issuer’s credit rating from EVTC to BB- / Stable Outlook from B +. S&P noted that EVTC’s conservative balance sheet and strong credit metrics as it increased revenue amid several external impacts were the basis for this upgrade. This follows the credit rating of the EVTC family of companies from B2 to B1 by Moody’s on August 5.
Recent financial results
EVTC revenue increased 26% year-on-year to $ 149.14 million in the fiscal second quarter ended June 30. Its Adjusted EBITDA stood at $ 80.26 million, up 60% from the same period last year. Its adjusted net profit rose 105.7% from its value a year ago to $ 57.13 million. The company’s adjusted EPS rose 105% year-over-year to $ 0.78.
For its fiscal second quarter, ended June 30, GPN’s adjusted net income increased 27.6% year-on-year to $ 1.94 billion. Its adjusted operating profit rose 44.1% from its value a year ago to $ 810.19 million, while its adjusted net profit improved 52.9% year-on-year. annual to $ 603 million. The company’s adjusted EPS improved 55.7% year-over-year to $ 2.04.
Past and expected financial performance
EVTC’s net profit and EPS have grown at CAGRs of 40.2% and 40.1%, respectively, over the past three years, respectively. Analysts expect the company’s revenue to grow 7.7% in the next quarter, 12.7% in the current year and 5.5% next year. The company’s EPS is expected to grow 6.8% in the next quarter, 28% in the current year, and 3.8% in the next year. Additionally, EVTC’s EPS is expected to grow at a rate of 13.4% per year over the next five years.
By comparison, GPN’s net profit has grown at a CAGR of 16% over the past three years, while its EPS has declined by 5.9% over that period. Analysts expect GPN’s revenue to grow 13.7% in the next quarter, 14.6% in the current year, and 10% next year. The company’s EPS is expected to grow 21.1% in the next quarter, 27.3% in the current year, and 17.5% in the next year. And its EPS is expected to grow at a rate of 20.1% per year over the next five years.
EVTC is more profitable, with gross margins and EBITDA of 58.10% and 41.91%, respectively, compared to 54.28% and 39.84% for GPN.
Additionally, EVTC’s ROE, ROA and ROTC of 44.80%, 10.98% and 12.95%, respectively, compare to GPN’s 3.23%, 2.13% and 2.52%.
Thus, EVTC is more profitable than GPN.
In terms of GAAP forward PER, GPN is currently trading at 43.33x, which is 50.5% higher than EVTC, which is currently trading at 21.44x. Additionally, GPN’s forward EV / EBITDA ratio of 15.89 is 21.8% higher than EVTC’s 12.43.
So, EVTC is a relatively affordable stock here.
EVTC has an overall B rating, which is equivalent to Buying in our property POWR odds system. GPN, on the other hand, has an overall C rating, which translates to Neutral. POWR scores are calculated by considering 118 different factors, each factor being weighted to an optimal degree.
EVTC has a stability rating of B, due to its beta below one, while GPN has a stability rating of C, consistent with its beta of slightly above.
Of the 102 shares of Financial Services (Business) sector, EVTC is ranked n Â° 12. In comparison, among the 51 shares of the Consumer financial services the industry, GPN is ranked # 26.
Beyond what we’ve stated above, we’ve also rated stocks for quality, sentiment, momentum, value, and growth. Click here to view the EVTC ratings. Also get all GPN ratings here.
The pandemic has reinforced the need for contactless payment methods. As digital payment solutions gain ground, EVTC and GNP should benefit. However, we believe its higher profit margins and lower valuation make EVTC a better investment here.
Our research shows that the chances of success increase when investing in stocks with an overall strong buy or buy rating. View all the top rated stocks in the financial services industry (companies) here. Also, Click here to view the highest rated stocks in the consumer financial services industry.
GPN stock was trading at $ 162.33 per share on Friday afternoon, down $ 1.66 (-1.01%). Year-to-date, GPN is down -24.39%, compared to an 18.81% increase in the benchmark S&P 500 over the same period.
About the Author: Subhasree Kar
Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After obtaining a master’s degree in economics, she acquired knowledge in equity research and portfolio management at Finlatics. Following…