Nuvei is one of my top picks, this investor says

With a major acquisition now completed and a stock that’s on the up-and-up, Canadian fintech company Nuvei (Nuvei Stock Quote, Charts, News, Analysts, Financials TSX:NVEI) is looking like a winner. So says portfolio manager Brian Madden, who just named NVEI one of his top picks for the 12 months ahead.

“We bought it about three weeks ago around $47,” said Madden, CIO at First Avenue Investment Counsel, who spoke on BNN Bloomberg on Thursday.”It was a COVID era IPO in 2020, the biggest IPO on the TSX that year, and it went up in parabolic fashion and it went down symmetrically. But it’s regaining its momentum, which is why we bought it.”

Montreal-based Nuvei is a global payment company with payment solutions in a number of verticals, including e-commerce, online betting, gaming, foreign exchange trading and cryptocurrency, along with point of sale solutions. 

The stock shot up from $45 in September of 2020 to as high as $170 by September 2021, but the downside was just as remarkable, with NVEI hitting $80 by the end of 2021 and then spending much of 2022 around $40. But the stock has picked it up more recently and is one of the best performers on the TSX this year with currently a 65 per cent year-to-date return.

Nuvei announced its Q4 and full 2022 financials earlier this month, showing total volume of transactions on its platforms up 34 per cent from the previous year to $127.7 billion, with e-commerce representing 89 per cent of that volume. The company’s 2022 revenue was up 16 per cent to $843.3 million, while adjusted EBITDA was up 11 per cent to $351.3 million and adjusted net income was up ten per cent to $1.86 per share.

Last month, Nuvei closed on the $1.3 billion acquisition of US payments company Paya, which last year had $50 billion in annual payment volume. 

Madden says the purchase will broaden Nuvei’s lineup of solutions into some new and ostensibly more stable sectors of the economy.

“Paya deepens their presence in less cyclical verticals like healthcare, government and education,” he said. “[The acquisition] is also very accretive and synergistic, so it’ll help their margins get up towards 50 per cent from the high 30s.”

“Nuvei increased their revenue guidance this year from about $1 billion to $1.2 billion on the back of that acquisition, so that has certainly certainly caught our attention,” he said. “We just see a very large addressable market opportunity in front of Nuvei here. And despite the run it’s had it trades at a pretty undemanding multiple, at less than 20x earnings. So, good explosive growth there and a pretty compelling valuation.”