Nuvei stock is oversold, this Scotia wealth manager says

Canadian payments company Nuvei (Nuvei Stock Quote, Charts, News, Analysts, Financials TSX:NVEI) has been for quite a ride since it debuted a couple of years ago, with the stock returning around 380 over its first year, only to lose all of that ground and more in the year and a bit since.

That’s too much of a takedown, says Greg Newman, senior wealth advisor at ScotiaMcLeod, who thinks that while investors shouldn’t bet the farm on a name like Nuvei, there’s lots to be positive about on the fundamental side and in terms of valuation.

“They trade about half of their peers, at about 10x 2023 EBITDA versus its payment peers that are 20x,” said Newman, speaking on BNN Bloomberg on Monday, where he nominated Nuvei as one of his top picks for the year ahead.

“[Nuvei is trading at] 13.3x 2024 P/E with 29 per cent estimated growth rate per share. So, price-to-growth, I think this is a really nice opportunity here. I think you can go in and buy some and and you’ll be rewarded over the next two to three years,” he said.

Nuvei was hit with a short-seller attack last December, one that critiqued the company’s revenue and earnings accounting along with the pedigree of some of Nuvei’s executives. In response, the stock dropped like a rock and has fizzled out further since, as the market continues to punish tech and fintech stocks this year.

Most of that market ire has been directed at companies with negative earnings, but in the case of Nuvei, the company is already in positive earnings, hitting net income of $210.7 million for the 2021 year and adjusted EBITDA of $317.2 million on revenue of $724.5 million. More recently, however, Nuvei’s third quarter 2022 saw net income drop 54 per cent year-over-year to $13.0 million on revenue up seven per cent to $197.1 million.

“We are pleased with our results for the quarter, which exceeded the financial outlook previously provided. Results were driven by higher volumes and wallet share expansion as reflected in our constant currency volume growth of 38 per cent, new client wins, our continued investment in technology and product offerings, and our geographic expansion,” said Philip Fayer, Nuvei’s Chair and CEO, in the third quarter press release in early November.

Newman said while Nuvei’s exposure to currently depressed sectors like cryptocurrency and gaming are clear downsides, those negatives have already been priced into the stock at current levels, he says.

“They beat across the board in their Q3, they guided in this environment to 20 per cent revenue growth and margins above 40 per cent. They have a diversified business model, so they’re not too affected by crypto, and they have no exposure to FTX at this point — they got out of that months ago,” he said.