GreenSky Stock: Why This Digital Payment Stock Can Triple

GreenSky Stock: Why This Digital Payment Stock Can TripleGreenSky LLC Is a High-Prospects Post-Pandemic Opportunity

The COVID-19 pandemic has wreaked havoc on the economy and spending. But things will improve and life will eventually return close to normal. As the economic renewal continues, companies that are involved in electronic transactions will also improve.

A small beaten-down digital payment company with above-average price appreciation potential is GreenSky LLC (NASDAQ:GSKY). Its shares are down about 50% this year, to an attractive level.

GreenSky provides an electronic payment platform that brings together merchants and consumers via mobile, online, and in-store points of sale.

While there’s concern about the impact of the pandemic on business, GreenSky has continued to increase its revenues. This will only get better as the pandemic risk subsides and the global economy returns to normalcy.

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The GreenSky stock chart shows a breakdown from the sideways channel in March, when the stock was trading just below $10.00. Going back to 2018, GSKY stock was trading at $27.00.

Chart courtesy of StockCharts.com

Simply retracing part of the decline from 2018 implies that there are potential major upside moves for GreenSky stock. If successful, the stock would target $7.00 to $10.00, followed by $12.00.

Higher Revenues and Profitability Bode Well for Depressed GSKY Stock

GreenSky LLC’s five-year revenue history shows why there was optimism that led to GreenSky stock’s high in 2018.

The company reported double-digit revenue growth from 2016 to a record $505.2 million in 2019. The compound annual growth rate for that period was 30.6%.

Fiscal Year Revenues (Millions) Growth
2015 $173.5 N/A
2016 $263.9 52.1%
2017 $325.9 23.5%
2018 $414.7 27.2%
2019 $505.2 21.8%

(Source: “GreenSky Inc. Cl A,” MarketWatch, last accessed November 13, 2020.)

While the pandemic risk remains, there is optimism. GreenSky is expected to grow its revenues to $546.5 million this year, followed by growth of 13.5% to $620.5 million in 2021. (Source: “GreenSky, Inc. (GSKY),” Yahoo! Finance, last accessed November 13, 2020.)

Moreover, GreenSky LLC has delivered positive earnings before interest, taxes, depreciation, and amortization (EBITDA), with double-digit growth in the last four years to a record $306.4 million in 2019.

Fiscal Year EBITDA (Millions) Growth
2015 $95.6 N/A
2016 $123.6 29.4%
2017 $195.3 58.0%
2018 $256.6 31.4%
2019 $306.4 19.4%

(Source: MarketWatch, op. cit.)

GreenSky has also been turning out steady earnings per share (EPS) on a generally accepted accounting principles (GAAP) and adjusted basis.

Fiscal Year GAAP Diluted EPS Growth
2015 $1.32 N/A
2016 $1.72 30.2%
2017 $2.42 40.8%
2018 $0.41 -83.2%
2019 $0.49 20.1%

(Source: MarketWatch, op. cit.)

GreenSky LLC is expected to see its profits impacted by the pandemic. The positive news is that the consensus EPS estimates have been on the rise.

After reporting an adjusted $0.57 per diluted share in 2019, GSKY is expected to report a big decline to $0.18 per diluted share this year, prior to bouncing to $0.39 per diluted share in 2021. (Source: Yahoo! Finance, op. cit.)

GreenSky has also been a steady producer of positive free cash flow over the last five years.

Fiscal Year Free Cash Flow (Millions) Growth
2015 $114.9 N/A
2016 $117.3 2.1%
2017 $156.3 33.2%
2018 $249.9 59.9%
2019 $137.9 -44.8%

(Source: MarketWatch, op. cit.)

Analyst Take

Investors should watch the insiders at GreenSky LLC; over the last six months, insiders bought 1.8 million shares of GSKY stock in 16 transactions and sold 176,838 shares in one transaction. (Source: Yahoo! Finance, op. cit.)

In my view, there are better days ahead for GreenSky stock, and given the current depressed price, it looks like an intriguing risk/reward opportunity for those with patience.