Payoneer has been on fire lately. In the past six months alone, the company’s stock price has rocketed 49.4%, reaching $7.13 per share. This performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Payoneer, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Payoneer Not Exciting?
We’re happy investors have made money, but we’re passing on Payoneer for now. Here are two reasons why there are better opportunities than PAYO, plus one stock we’d rather own.
1. EPS Took a Dip Over the Last Two Years
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Sadly for Payoneer, its EPS declined by 5.2% annually over the last two years while its revenue grew by 9.6%. This tells us the company became less profitable on a per-share basis as it expanded.
2. Previous Growth Initiatives Haven’t Impressed
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of financial firm funding. Financial firms maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Payoneer has averaged an ROE of 7.9%, uninspiring for a company operating in a sector where the average shakes out around 10%.
Final Judgment
Payoneer isn’t a terrible business, but it isn’t one of our picks. Following the recent surge, the stock trades at 19.1× forward P/E (or $7.13 per share). At this valuation, there’s a lot of good news priced in - you can find more timely opportunities elsewhere. We’d suggest looking at a dominant aerospace business that has perfected its M&A strategy.
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