What a brutal six months it’s been for Shift4. The stock has dropped 36.6% and now trades at $65.50, rattling many shareholders. This may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy FOUR? Find out in our full research report, it’s free.
Why Are We Positive On Shift4?
Starting as a payment gateway provider in 1999 and now processing over $200 billion in annual payment volume, Shift4 Payments (NYSE: FOUR) provides integrated payment processing solutions and software that help businesses accept and manage transactions across in-store, online, and mobile channels.
1. Skyrocketing Revenue Shows Strong Momentum
A company’s long-term performance is an indicator of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years.
Over the last five years, Shift4 grew its revenue at an incredible 38.6% compounded annual growth rate. Its growth surpassed the average financials company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Shift4’s full-year EPS flipped from negative to positive over the last five years. This is a good sign and shows it’s at an inflection point.
3. Previous Growth Initiatives Are Paying Off
Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.
Over the last five years, Shift4 has averaged an ROE of 13%, respectable for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Shift4 has a narrow competitive moat.
Final Judgment
These are just a few reasons why we're bullish on Shift4. With the recent decline, the stock trades at 10.9× forward P/E (or $65.50 per share). Is now a good time to initiate a position? See for yourself in our full research report, it’s free.
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