Priority Technology Holdings Inc: Payment Tech Stock Could Double

PRTH Stock Could Be Next Big Payment Tech Play

The COVID-19 pandemic drove the demand for electronic payment solutions, and based on what we’ve been seeing, the tailwinds will remain strong.

A compelling small-cap play on the electronic payment space is Priority Technology Holdings Inc (NASDAQ:PRTH). The company provides payment solutions to small and mid-sized businesses, enterprises, and partners in the retail, financial, and wholesale sectors.

A look at the below chart shows Priority Technology stock staging a strong upward trend, with multiple breakouts from accumulation channels.

PRTH stock is up by a sizzling 242% over the past year, but it has paused since its March high of $9.50.

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Watch the 50-day moving average and channel support at $6.00, where I see an opportunity.

Chart courtesy of StockCharts.com

Financial Performance

Priority Technology Holdings Inc has recorded four consecutive years of muted revenues.

Fiscal YearRevenues (Millions)Growth
2017$425.6N/A
2018$375.8-11.7%
2019$371.9-1.1%
2020$404.38.7%

(Source: “Priority Technology Holdings Inc.,” MarketWatch, last accessed June 25, 2021.)

There’s some excitement after Priority Technology Holdings Inc announced its proposed acquisition of Finxera Holdings, Inc., which will help drive revenue growth.

Priority Technology’s revenues are expected to surge by 17.8% to $476.2 million this year, followed by 22.4% to $582.9 million in 2022. (Source: “Priority Technology Holdings, Inc. (PRTH),” Yahoo! Finance, last accessed June 25, 2021.)

Priority Technology is coming off four straight years of earnings before interest, taxes, depreciation, and amortization (EBITDA) income, including a record $64.9 million in 2020.

The EBITDA income will likely increase in 2021 with the addition of Finxera.

Fiscal YearEBITDA (Millions)Growth
2017$49.5N/A
2018$42.7-13.9%
2019$51.921.8%
2020$64.925.0%

(Source: MarketWatch, op. cit.)

The profit/loss picture has been mixed over the past four years, but Priority Technology Holdings Inc recorded a four-year generally accepted accounting principles (GAAP) earnings-per-share (EPS) high of $0.38 for 2020.

Fiscal YearGAAP Diluted EPSGrowth
2017$0.06N/A
2018-$0.29-547.2%
2019-$0.50-72.5%
2020$0.38176.2%

(Source: MarketWatch, op. cit.)

On an adjusted basis, Priority Technology Holdings Inc reported a loss of $1.18 per diluted share in 2020. Analysts estimate that this will improve to $0.05 per diluted share this year, prior to surging to $0.52 per diluted share in 2022. (Source: Yahoo! Finance, op. cit.)

Priority Technology delivered positive free cash flow in each of the last four years, including two straight years of growth to a record level in 2020.

The company’s acquisition of Finxera should drive FCF higher, which could be used to reduce the higher debt load after the acquisition.

Fiscal YearFree Cash Flow (Millions)Growth
2017$30.3N/A
2018$20.8-31.4%
2019$28.335.9%
2020$39.640.2%

(Source: MarketWatch, op. cit.)

Analyst Take

Priority Technology stock has light institutional ownership, but I wouldn’t be surprised to see more institutions jump on board. Insiders have been adding PRTH stock. Over the last six months, insiders added a net 1.0 million shares. (Source: Yahoo! Finance, op. cit.)

Priority Technology Holdings Inc trades at an attractive 0.9 times its consensus 2022 revenue estimate, which presents a compelling opportunity relative to its peer group.

In my view, a doubling of the Priority Technology stock price would not be a stretch.