Euronet Latest Pullback Comes With Much Greater Operating Uncertainties

As I've mentioned in past articles on Euronet (EEFT), this is a pretty classic "second chance" stock, as the stock's generally high multiples and the company's somewhat erratic growth trajectory have led to frequent double-digit declines that give investors another chance to get into what has been a pretty good growth story over the past decade-plus.

The shares have chopped lower since the third quarter earnings report, and some soft spots in fourth quarter earnings and guidance (for the first quarter) haven't helped, not to mention ongoing worries about what the EU may do regarding regulation of dynamic currency conversion. I still believe, though, that there are attractive growth prospects in the ATM and money transfer business, as well as the epay segment as it transitions away from mobile top-up. If a revenue growth rate in the mid-to-high single digits and a mid-teens growth rate for EBITDA and FCF are still reasonable expectations, these shares offer meaningful upside into the high-$90s, but the downside risk if EU reforms decimate DCC revenue is significant (into the $60s).

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Euronet Latest Pullback Comes With Much Greater Operating Uncertainties

Euronet's Fee-Based Businesses Continue To Support A Healthy Growth Outlook

Euronet (NASDAQ:EEFT) has been a consummate second-chance stock for me over the years. While this leading operator of ATMs, digital payment, and money transfer systems has maintained a strong record of revenue and EBITDA growth, that performance hasn't always been as consistent as the Street would like. Add in periodic fears about competitors like Western Union (NYSE:WU) and MoneyGram (NYSE:MGI), new money transfer options, and pricing pressure from major partners like Wal-Mart (NYSE:WMT), and the shares have reliably given investors a roughly 15%-20% pullback opportunity at least once a year for a few years. 

These shares have been strong since the bottom of the last pullback, rising about a third since early February (and about 25% since my last update). Both the underlying EFT and money transfer businesses remain strong, and the epay operation is arguably better than it looks as the company transitioning away from mobile top-up and toward newer offerings like iTunes and Google Play, but the shares are not exactly bargain-priced today. 

Given the strong underlying trends in the business and the history of meaningful pullbacks, I'd give this stock a prominent spot on a watchlist in anticipation of another pullback opportunity at some point in the next year or so.

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Euronet's Fee-Based Businesses Continue To Support A Healthy Growth Outlook

Euronet's Valuation Has Improved, But So Has The Business

I had a nice little thing going with Euronet (NASDAQ:EEFT). I'd write about this largely unknown operator of ATMs, convenience payment services and money transfers every six to 12 months; the shares would be around 10% undervalued, they'd go up around 10%, and we'd do it all over again.

Although I don't see quite the same level of undervaluation as in past updates, I still believe it's a good company trading a little bit below fair value. In my investing experience, it has generally worked out better to buy a good company that's a little bit cheap than to buy an inferior company that's trading at a wider apparent discount to fair value. I'd also note that there are visible catalysts that could improve both the ATM and money transfer businesses in the relatively near future and drive higher earnings expectations.

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Euronet's Valuation Has Improved, But So Has The Business

Seeking Alpha: Euronet's Multiple Moving Parts Still Moving Forward

Euronet Worldwide (NASDAQ:EEFT) is an odd collection of businesses, but it's a collection that seems to work - in part, at least, because it's a business built around collecting a small piece of transactions from what I would generally consider to be convenience services. This isn't a flawless business, but Euronet seems to have found its niche and it's one that I think can continue to support a respectable level of growth.

I thought the shares were a little undervalued last time around, and the stock is up a little more than 10% then. Once again, the shares look a little undervalued to me, with that valuation predicated on a long-term slowdown in revenue growth to the mid-single digits. Given the opportunities the company has to expand its ATM network, its ePay business, and its money transfer operations, this could be an interesting name to watch/own for some time.

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Euronet's Multiple Moving Parts Still Moving Forward

Seeking Alpha: Euronet Remains Leveraged To Global Financial Transaction Volume Growth

Facilitating millions of financial transactions, and taking a small cut along the way, continues to be a very good business for Euronet Worldwide (NASDAQ:EEFT). The company has established three roughly equal units (in terms of EBTIDA contributions) across ATM services, ePay, and money transfers - all of which offer solid transaction volume growth potential in the years to come. What's more, there's still a large runway of opportunities to add ATMs around the globe (and/or offer more services through them) as well as a lot of potential ePay transactions to capture.

These shares are up about a third from when I last wrote about them. I'm still bullish on the company and I think there's room for the company to exceed my revenue and/or margin targets. With my base-case model still showing some undervaluation on both a cash flow and EBITDA basis, I think this remains a solid GARP stock candidate.

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Euronet Remains Leveraged To Global Financial Transaction Volume Growth

Seeking Alpha: Euronet Still Looking To Transfer Growth Into Shareholder Value

Around six months ago, I tagged Euronet Worldwide (EEFT) with the "interesting company, not so interesting stock" label and I can't say that I feel like I've missed much. The shares are up about 5% since then, trailing the S&P 500 and really only performing well after a money transfer business agreement with Wal-Mart (WMT). I'm more favorably inclined toward Euronet at this point, though, as I like the Wal-Mart agreement and the HiFX acquisition and the shares appear priced to offer a decent return.

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Euronet Still Looking To Transfer Growth Into Shareholder Value

Seeking Alpha: Euronet's Strong Move Underlines The Business Improvements

By no means is Euronet (EEFT) an unnoticed or unappreciated improvement story. With all three of the company's business segments looking stronger, shares of this financial services company have more than doubled in the past year. There are still several attractive avenues for growth in this company, but investors probably ought to moderate their expectations for further appreciation given the big move and the current valuation.

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Euronet's Strong Move Underlines The Business Improvements