Paysign Stock: Economic Reopening Could Power a Strong Breakout

PAYS stockManagement Change Shakes Things Up at PaySign Inc 

Payment solutions stocks have emerged as clear winners during the COVID-19 pandemic. While the market talks about the big-name payment stocks, there are also numerous small players that the majority of investors never hear about.

That’s the case with micro-cap Paysign Inc (NASDAQ:PAYS), a provider of payment solutions including prepaid debit cards and customizable payment services. The company has clients in health care, pharmaceuticals, universities, and social media.

Paysign Inc, like many companies, was negatively impacted by the pandemic’s effects on the economy. Paysign is expected to report a dismal 2020, which will likely be blamed on the pandemic hurting consumer spending.

But with the economy showing strong signs of reopening, PAYS stock will likely see a much-improved 2021.

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Moreover, Paysign will go forward with a new president/chief operating officer and a new chief financial officer. (Source: “Paysign Announces Executive Leadership Changes,” Paysign Inc, February 24, 2021.)

A look at the Paysign stock chart shows a bearish double top just under $11.00 in June and August 2020.

PAYS stock subsequently sold off. The chart shows the emergence of a bearish death cross pattern in September, when the 50-day moving average broke below the 200-day moving average.

The moving average crossover suggests near-term concerns. Paysign stock has settled in a tight sideways channel around the 50-day moving average.

Chart courtesy of StockCharts.com

My technical view is that a reversal in PAYS stock’s relative strength could provide the catalyst for the stock to break back toward $6.00–$8.00.

Improving Economy Bodes Well for PAYS Stock

Paysign Inc recorded double-digit revenue growth in each of its last four reported years, to a record $34.7 million in 2019, implying a healthy compound annual growth rate (CAGR) of 43.8%.

Fiscal Year Revenues (Millions) Growth
2015 $8.1 N/A
2016 $10.4 28.5%
2017 $15.2 46.3%
2018 $23.4 53.8%
2019 $34.7 48.0%

(Source: “Paysign Inc.” MarketWatch, last accessed March 12, 2021.)

But then the pandemic surfaced, leading to economic lockdowns and a major decline in business activity. Paysign saw a decline in its expected revenues and earnings for 2020 and 2021.

For 2020, the company is expected to see its revenues fall 30% to $24.3 million but recover by a healthy 72.5% to $41.8 million in 2021. (Source: “Paysign, Inc. (PAYS),” Yahoo! Finance, last accessed March 12, 2021.)

Prior to the pandemic, Paysign Inc delivered five years straight of positive earnings before interest, taxes, depreciation, and amortization (EBITDA), including four years straight of double-digit EBITDA growth.

Fiscal Year EBITDA Growth
2015 $300,000 N/A
2016 $1.9 Million 445.7%
2017 $2.6 Million 36.9%
2018 $3.6 Million 34.7%
2019 $7.6 Million 112.9%

(Source: MarketWatch, op. cit.)

Paysign Inc also turned out profits based on generally accepted accounting principles (GAAP) earnings-per-share (EPS) in its last five reported years, marking a record in 2019.

Fiscal Year Diluted GAAP EPS Growth
2015 -$0.06 N/A
2016 $0.03 150.0%
2017 $0.04 24.3%
2018 $0.05 32.4%
2019 $0.14 176.5%

(Source: MarketWatch, op. cit.)

For 2020, PAYS is expected to report an adjusted loss of $0.06 per diluted share before moving back to profits of $0.14 in 2021. (Source: Yahoo! Finance, op. cit.)

Paysign Inc was also generating rising free cash flow (FCF) prior to the pandemic. This included four years straight of impressive growth, including a record $9.5 million of FCF in 2019.

Fiscal Year FCF (Millions) Growth
2015 -$1.6 N/A
2016 $1.2 172.9%
2017 $2.0 75.5%
2018 $4.2 106.6%
2019 $9.5 126.2%

(Source: MarketWatch, op. cit.)

Analyst Take

In my view, Paysign Inc was moving in the right direction prior to the COVID-19 pandemic. The pandemic may have stalled things, but I’m bullish that Paysign stock will rally as the economy reopens.

Insiders appear to be buying PAYS stock on the price weakness. Over the last six months, insiders added 1.2 million shares. (Source: Yahoo! Finance, op. cit.)