Bottomline Stock Set to Gain From Evolving Fintech Space
Today’s stock is related to another of our preferred methods of growth stock investing. Stocks of companies that provide products and services that are vital to the digital transformation of enterprises could help investors earn great returns.
One of the industries that is undergoing massive disruption is the payments industry. A few companies in this space stand out. One such company is Bottomline Technologies Inc (NASDAQ:EPAY), a leading provider of financial technology (fintech) to more than 10,000 corporations, financial institutions, and banks.
The company helps make complex business payments simple, smart, and secure. Its cloud-based business payment, fraud prevention, digital banking, and financial document solutions help businesses make and receive payments. Bottomline stock is likely to do well in the evolving and lucrative financial fintech space.
Bottomline’s customers are in industries like banking, insurance, financial services, healthcare, retail, and technology. The majority of the company’s revenues are from software as a service (SaaS)-based solutions.
More than 60% of organizations still make more than half of their payments by paper check, and more than 80% of organizations identify high overall payment costs as a driver of automation. This indicates huge opportunities for companies like Bottomline Technologies.
According to a recent study, digital payments are expected to reach 726.0 billion by 2020. The study predicts that technological innovations like wearable devices, contactless bank cards, and augmented reality (AR) will drive cashless transactions in the future. (Source: “Digital payments expected to hit 726 billion by 2020 – but cash isn’t going anywhere yet,” CNBC, October 9, 2017.)
As the volume of non-cash payments keeps increasing, Bottomline Technologies stands to gain. The company’s objective is to be the leading global provider of business payment technologies, so it is investing heavily in its products, which is driving 15%–20% of its organic subscription and transaction growth.
The company’s popular settlement network “Paymode-X” allows businesses to easily transition from paper to electronic payments, maximizing cost savings and efficiency. With more than 365,000 members, Paymode-X clients gain immediate benefits, since many of their vendors are already part of the network.
During fiscal 2017, Bottomline Technologies generated record levels of subscription and transaction revenue, overall revenue, and core earnings before interest, tax, depreciation, and amortization (EBITDA).
The company continued to drive significant increases in subscription and transaction revenue, which is the largest and fastest-growing component of the company’s overall revenue.
Bottomline Technologies announced its second-quarter results last month. Subscription and transaction revenues (mostly related to the company’s cloud platforms) were $63.2 million in the quarter, which was an increase of 14% year-over-year. Overall revenues in the quarter were $95.2 million, representing 10% growth year-over-year. (Source: “Bottomline Technologies Reports Second Quarter Results,” Bottomline Technologies Inc, February 1, 2018.)
The company also recorded strong bookings in the quarter. More than 30 institutions selected Paymode-X to automate their payments processes, reduce costs, and earn rebates.
As for the Bottomline stock price, there has been a gradual ride up in the last year, gaining about 45%.
Chart courtesy of StockCharts.com
Bottomline Technologies operates cloud-based settlement networks that facilitate electronic payments and settle transactions between businesses, their vendors, and banks. Its innovative products are gaining traction in a highly competitive market.
Given the evolution of the payments industry, the prospects are bright for Bottomline Technologies.
Bottomline stock is likely to move higher in the coming years, provided that profitability increases. Although the company has been posting growth in all areas, profitability remains a key concern. The coming quarters will make the picture clearer. Until then, EPAY stock might face volatility.