The underfollowed payments upstart keeps growing at a fast clip.
Shares of Shift4 Payments (FOUR -0.74%) shot up over 10% this week, according to data from S&P Global Market Intelligence. The payment processor with a focus on hospitality and entertainment grew its revenue and earnings at a fast clip yet again in the second quarter. With its acquisition and international expansion strategy, the company is hoping to keep up this impressive growth in the coming years.
As of 3:17 p.m. ET on Friday, Aug. 16, shares of Shift4 Payments are up 13.9% this week and 41.5% over the last year. Here’s why.
Winning in core markets
Shift4 Payments processes billions of dollars’ worth of payments for restaurants and entertainment venues. The digital processor was founded by Jared Isaacman when he was 16 years old (not a typo) in 1999 and has grown throughout the years through organic means and acquisitions. Last quarter, the company processed $40.1 billion in payments, up from $26.8 billion in the same quarter a year ago and $4.2 billion in Q2 of 2020. This 10x growth over just a few years is a 75% compound annual growth rate (CAGR) for payment processing, making it one of the fastest-growing companies in the sector.
Revenue and earnings have followed suit. Revenue grew 30% year over year last quarter to $827 million, with net income of $54.5 million, and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of $162.4 million. Even though it is investing heavily for growth, Shift4 Payments has been able to remain profitable.
Management highlighted some big recent wins, including the Nobu Hotel and the Chicago Bears American Football stadium. Its product offering caters to restaurants, hotels, and entertainment venues. These locations are unique and can process tons of payments in a short time, meaning they need specific products compared to a general payments offering. It looks like Shift4 is proving it is the company to provide these services.
The stock still does not look expensive
Even thought it processes $40 billion in payments each quarter, Shift4 Payments management still thinks there is a long way to grow. It hopes to expand to many more international markets and deepen its penetration for hotels and sporting venues, as well as keep up its acquisition strategy.
The stock currently trades at a forward price-to-earnings ratio (P/E) of just 21.5, which is below the S&P 500 market average of 28. The company is growing much faster than the market average. Investors who believe in the long-term growth story at Shift4 Payments could do well buying some shares at these prices, even after the price bump this week.