Why Shift4 Payments Stock Popped Today
Payment processing solutions company Shift4 Payments (NYSE: FOUR) surged ahead 10% through 11 a.m. ET Tuesday after reporting mixed earnings this morning.
On one hand, Shift4 beat earnings forecasts soundly, reporting $1.07 per share in adjusted profit, where Wall Street expected only $0.95. On the other hand, revenue came up short. The company recorded $848.3 million, less than the $862 million analysts had forecast.
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Company president Taylor Lauber boasted record payment volume in the year's first quarter, $45 billion, calling payment volumes "healthy" and noting "recent political commentary and capital markets volatility have not translated into reduced consumer spending across our merchants."
Payment volume grew 35%, translating into 40% growth in gross revenue after network fees -- less than expected, but still quite healthy. Net income declined by 32% regardless, and adjusted free cash flow as calculated by the company was down 10% year over year at $70.5 million -- albeit the company's description of how it arrives at that figure is somewhat vague.
A more traditional measure of free cash flow, operating cash flow minus capital expenditures and capitalized software costs, could put FCF at anywhere from $46.6 million to $76.9 million.
Turning to guidance, management expanded its range of possible outcomes this year slightly, forecasting revenue in the $1.66 billion to $1.73 billion range, which works out to 23% to 28% year-over-year growth -- slower than seen in Q1.
Management further noted that it expects adjusted free cash flow "conversion" rate to be about 50%. Again, this is a rather opaque and company-specific measurement. But applied to the company's forecast for adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA), it would appear to imply somewhere between $420 million and $432.5 million in FCF this year, valuing the $5.5 billion company at perhaps 13 times FCF.
While the math is pretty fuzzy, for any company growing revenue at better than 20%, that seems a good value.
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Rich Smith has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Shift4 Payments. The Motley Fool has a disclosure policy.
Why Shift4 Payments Stock Popped Today was originally published by The Motley Fool
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The Simply Wall St app conducts a discounted cash flow valuation for every stock on the SGX every day. If you want to find the calculation for other stocks just search here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. 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