Shares of Shift4 Payments is a company that processes payments for businesses. ( FOUR -0.46% ) increased by more than 10% this week, as reported by data from S&P Global Market Intelligence is the name of the company. The payment processor specialized in the hospitality and entertainment sectors experienced rapid growth in revenue and earnings during the second quarter. Through its strategy of acquiring companies and expanding internationally, the company aims to sustain this remarkable growth in the future.
At 3:17 p.m. ET on Friday, August 16th, Shift4 Payments’ stock has increased by 13.9% this week and by 41.5% in the past year. Let’s explore the reasons behind this growth.
Succeeding in primary markets
Shift4 Payments is a leading digital processor that handles a significant amount of payment transactions for restaurants and entertainment establishments. It was established by Jared Isaacman at the age of 16 in 1999 and has expanded over time through both natural growth and acquisitions. In the most recent quarter, the company processed $40.1 billion in payments, a substantial increase from $26.8 billion in the same quarter the previous year and $4.2 billion in the second quarter of 2020. Achieving a 10-fold growth within a short period has resulted in a remarkable 75% compound annual growth rate (CAGR) for their payment processing services, positioning them as one of the rapidly expanding entities in the industry.
Income and profits have similarly increased. Revenue experienced a 30% growth compared to the previous year, reaching $827 million in the last quarter. The net income stood at $54.5 million, and the adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) also showed positive results. EBITDA Despite making significant investments in growth, Shift4 Payments has managed to stay profitable, with a net income of $162.4 million.
Management emphasized significant recent successes, such as securing contracts with the Nobu Hotel and the Chicago Bears’ football stadium. Their product line is tailored for use in restaurants, hotels, and entertainment establishments. These venues have high transaction volumes and require specialized payment solutions, setting them apart from generic offerings. Shift4 appears to be establishing itself as the go-to provider for these specialized services.
The stock appears to still be reasonably priced.
Despite handling $40 billion in payments every quarter, Shift4 Payments management believes there is still significant room for growth. The company aims to enter more international markets, increase its presence in the hotel and sporting venue sectors, and continue its strategy of acquiring other businesses.
At present, the stock is being traded at a forward price-to-earnings ratio (P/E). P/E with a score of only 21.5, which falls under the S&P 500 The company’s growth rate exceeds the market average of 28%. Investors who have confidence in Shift4 Payments’ long-term growth potential may find it beneficial to purchase some shares at the current prices, despite the recent price increase this week.
