who are this companies direct competitors? how much debt does Nuvei have, and do you feel comfortable that it can service this debt with their current earnings? also, do you think it could be a take over target now?
cheers, chris
NVEI competes with companies like SHOP, SQ, PYPL, and PAYO. NVEI has net debt of $1.16B, which represents just over half of its equity position, and its net debt/EBITDA is 5.3X. NVEI generated $212M in free cash flow over the past 12 months of which it used roughly half to repurchase shares and some to pay down debt. Its debt levels are fairly high, but given its cash flow, we feel the debt is manageable.
It trades at a cheap valuation, but investors are concerned of the potential for more of its customers leaving, and this could significantly erode the company's profits, leaving its debt levels unsustainable. Much will depend on whether other customers of NVEI leave and if the company can turn its fundamentals around. There is work to be done here, and there are still momentum and execution risks. We think it is in a 'show me' stage.