NVEI stock looks “very compelling” right now, says National Bank

After meeting with management, National Bank Financial analyst Richard Tse has maintained his “Buy” rating on Nuvei Corporation (Nuvei Corporation Stock Quote, Chart, News, Analysts, Financials TSX:NVEI).

The analyst says despite a bumpy road as a pubco, the stock’s valuation is looking compelling right now.

“If you’ve been following this name, you know very well the stock’s volatility since becoming a public company in 2020 with the most recent driver of that volatility coming from its last reported quarter when its decision to exit a customer relationship and the moderating of both its near-term and mid-term growth targets fuelled another pullback,” wrote Tse. “Regardless of what those drivers of volatility may be, the reality is that the number of occurrences fuels the lower (relative) valuation against its peers. Yet, as we look at today’s valuation of 8.6x (EV/EBITDA F23) against our growth estimates – total and organic – NVEI is looking very compelling. With respect to our lunch, our focus undoubtedly was to assess the risk to our numbers, particularly in the short term, the reasonableness of the assumptions around the short and mid-term outlook and additional commentary that the Company’s intentional exiting of a top 10 customer is not reflective of its product offering that would risk other exits, all paired against our own industry diligence. All in, at the current stock price, NVEI looks very compelling.”

In a research update to clients September 17, Tse maintained his “Outperform” rating and one-year price target of (US) $27.00 on Nuvei, implying a return of 58 per cent at the time of publication.

Tse thinks NVEI will post Adjusted EBITDA of $424.2-million on revenue of $1.19-billion in fiscal 2023. He expects those numbers will improve to EBITDA of $492.5-million on a topline of $1.41-billion the following year.

The analyst says Nuvei is not the least risky stock you might own, but adds that there is a caveat.

“We believe the risk profile in this name is high relative to its peers given what we’ve noted at the beginning of this note; yet NVEI’s valuation already reflects much of that risk,” he argued. “Based on reflection of what we heard over lunch late last week, we continue to think Nuvei has differentiated itself by focussing on outsized growth segments with an à la carte go-to-market while (more recently) expanding its TAM into larger enterprise merchants. At 7.4x EV/EBITDA (CY24), that represents an approximate 3.0x discount to its closest peers – a considerable discount. In our view, the risk-to-reward profile is very compelling. We reiterate our Outperform rating and US$27 (unchanged) price target. Our DCF target implies EV/EBITDA of 10.2x on F24E (unchanged).”