The COVID-19 pandemic has hit the global economy in 2020, but we’re beginning to see some optimism surface with vaccines. Amid the pandemic, we saw a marked shift toward the use of digital payment systems. We expect this trend to grow, given the global move away from cash transactions.
The opportunities for companies that provide digital payment processing solutions is huge. A small-cap stock in this field with strong price-appreciation potential is Repay Holdings Corp (NASDAQ:RPAY).
The company provides proprietary vertically integrated payment processing solutions. Its clients are in sectors including personal loans, automotive loans, mortgage servicing, credit unions, business-to-business payments, and receivables management.
RPAY stock has more than doubled from its March low of $10.69, up 67% this year and easily outperforming the Nasdaq.
As the below chart shows, Repay Holdings stock is currently in a consolidation channel between $21.50 and $28.00.
In the immediate term, keep an eye on the 200-day moving average of $21.72 and the channel support.
Chart courtesy of StockCharts.com
RPAY stock failed to break channel resistance of $28.00 on three attempts since coming out of its March low. A breakout would send Repay Holdings stock to new highs and establish another leg up.
Strong Revenue Growth Bodes Well for RPAY Stock
Debuting on the stock market in July 2019, Repay Holdings Corp has a limited public operating history.
The company reported revenues of $130.0 million in 2018, prior to slipping to $104.6 million in 2019. (Source: “Repay Holdings Corp.” MarketWatch, last accessed December 10, 2020.)
Repay Holdings also presented positive earnings before interest, taxes, depreciation, and amortization (EBITDA) of $26.0 million in 2018 and $21.17 million in 2019.
Moreover, the company made generally accepted accounting principles (GAAP) profits of $0.33 per diluted share in 2018, before reverting to a loss of $1.07 per diluted share in 2019.
The company managed to deliver positive free cash flow of $23.3 million in 2018, followed by $20.6 million in 2019.
While the full economic impact of the pandemic is unknown, Repay Holdings is expected to ramp up its revenues by 45.6% to a record $152.3 this year, followed by 23.4% to $187.9 million in 2021. (Source: “Repay Holdings Corporation (RPAY)” Yahoo! Finance, last accessed December 10, 2020.)
Analysts estimate that, on an adjusted basis. Repay Holdings will earn $0.14 per diluted share in 2020 and $0.55 per diluted share in 2021.
The fact that Repay Holdings Corp’s revenues and profitability continue to be strong despite the pandemic is encouraging.
Institutional ownership of Repay Holdings stock is strong, in part due to the stock’s inclusion in the Russell 2000 Index. About 210 institutions hold the company’s shares. (Source: Ibid.)
My longer-term bullish thesis for RPAY stock is supported by the strong tailwinds in the global digital payments market.