Image source: Getty Images
the EML Payments Ltd (ASX: EML) The share price seems like an exciting opportunity for many analysts right now.
EML is a financial technology (fintech) company that powers many types of payments including physical cards, e-gift cards, virtual bank accounts, salary packaging, game payments, buy it now, payout later (BNPL), etc.
Right now there are at least three different brokers who like EML as an investment with potential.
One of those with a buy rating on fintech stock is UBS. Its target price is $ 4.40. This suggests a possible rise of over 30% this year if the broker is correct.
What does UBS like about the EML share price?
In May 2021, EML shares fell sharply. They fell more than 40% as investors learned that the Central Bank of Ireland (CBI) was concerned about EML’s anti-money laundering processes, compliance and risk management and the financing of terrorism (AML / CTF).
It was a potentially painful decision as the CBI could have put limits on EML’s Irish activities, as well as having various other impacts. The EML entity, PFS Card Services (Ireland) Limited (PCSIL), is responsible for a substantial payment volume.
However, towards the end of November, EML delivered some good news regarding the CBI investigation, which UBS said had ruled out a lot of risk.
The CBI said it would allow PCSIL to sign new clients and launch new programs while respecting physical growth restrictions. PCSIL is confident that it can meet these obligations.
In addition, no general reduction in limit controls on programs will be imposed. CBI is pleased to continue to work with PCSIL to agree on appropriate limits as part of its risk management and control framework.
The CBI has said it intends to implement a hard growth cap on PCSIL’s total payment volumes that will be enforced for 12 months, or canceled sooner. This follows a third party verification to confirm that the PCSIL remediation plan has been effectively implemented. PCSIL has removed the higher volume, lower performance programs to allow it to comply with a hardware growth restriction.
The broker says EML will be able to increase customer growth with this latest update, which is expected to help grow the business.
How fast does EML grow?
Investors often like to look at the growth rate and expected rate of growth of a business before deciding what to evaluate it on. So faster growth could be helpful for the EML share price.
In FY 21, gross throughput volume (GDV) grew 42% to $ 19.7 billion and underlying net profit after tax (NPATA) increased 54% to $ 32.4 million of dollars.
Then, in the first quarter of FY22, GDV rose another 14% to $ 5.5 billion year-on-year. Revenue rose another 29% to $ 52.4 million and underlying net profit rose 41% to $ 4.6 million.
It continues to gain new customers and process more volume for existing customers.
What is the valuation of the EML share price?
Based on UBS figures, EML is valued at 27 times the estimated profit for fiscal year 23.