NVEI shares are down substantially from its high as growth slows down, and this has also changed valuation substantially. NVEI is now trading at 8.5x Forward P/E. While the company has clearly messed up, this has come along with multiple compression for most high-growth fintech names due to the high interest rate environment and tough competition. Losing a large customer did not help either. The balance sheet is highly leveraged after the acquisition in 2022, with net debt of around $1.1B and net debt/EBITDA is 5.3x.
Having said that, the company is still generating positive free cash flow and buying back shares (although unlikely over the next few years as the company prioritizes paying down debt). We think NVEI is a hold for now, valuation is cheap making its risk-reward profile attractive. But momentum is weak, there could be tax loss selling, and the market as usual is challenging. We would not add.