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Here's Why You Should Hold Euronet (EEFT) in Your Portfolio

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Euronet Worldwide, Inc. (EEFT - Free Report) is on a steady growth pitch, banking on its strong revenue trajectory, strategic efforts and a solid financial standing.

Its return on equity — a profitability measure — is 24.2%, better than the industry average of 22%. This in turn reflects the company’s efficiency in utilizing its shareholders’ funds.

The company also retained investors' bullish sentiment by retaining its stellar earnings trend in all the last four reported quarters, the average being 0.94%. This definitely reiterates the company’s operating efficiency.

It also carries a VGM Score of A. Here V stands for Value, G for Growth and M for Momentum with the score being a weighted combination of all the three.  

Euronet has been witnessing a strong revenue momentum over the past several years, evident from its five-year CAGR of 12.4%. Revenues grew by a further 14.5% in the first nine months of 2019. The uptick was driven by solid segmental results as well as diversity across products and geographies.

 Euronet Worldwide’s growth strategy has worked to its advantage. The company finished the third quarter of 2018 with 41,902 ATMs, up 10% year over year. It deployed around 3,250 high-value ATMs across Europe and India and also acquired around 400 Easycash ATMs in Ireland along with 160 ATMs under low-margin agreements in India.

Solid performances by the company’s EFT and Money Transfer segments also boosted its earnings results. The EFT segment saw consecutive years of double-digit growth, mainly driven by Euronet’s constant focus on deploying more devices across the extended markets and its ability to develop an advanced technology for new products at both ATMs and POS terminals for optimizing and enriching the customer experience.

Notably, the Money Transfer Segment is fueling growth for the physical and digital distribution channels. Regular buyouts, alliances and renewals of deals also poise the segment well for growth.

Additionally, the company enjoys balance sheet strength as its leverage is quite low as compared to the industry. Its debt to equity ratio is 74.2%, comparing favorably with the industry’s 195.4%.

However, the company has been suffering from high operating expenses over the years, which induced margin contraction. Further, this has eroded its earnings per share. Unfortunately, expenses should remain elevated going ahead as the company continues to invest in technology and other expansion initiatives. Its debt obligation has also been deteriorating since 2013, which persistently drains the margins.

The Zacks Consensus Estimate for the company’s 2018 earnings is pegged at $5.48, representing a year-over-year rise of 19.7% on revenues of $2.6 billion.

For 2019, the Zacks Consensus Estimate for earnings stands at $6.82 on $2.9 billion revenues, translating into a respective 24.4% and 13.9% rise.

Shares of this Zacks Rank #3 (Hold) have gained 10.4% versus its industry’s fall of 24%.



Stocks to Consider

Investors interested in the same space might consider a few better-ranked stocks like On Deck Capital, Inc. , FedNat Holding Company and Virtu Financial, Inc. (VIRT - Free Report) .

On Deck Capital operates as an online platform for small business lending in the United States, Canada and Australia. It managed to deliver positive results in three of the last four reported quarters, the average earnings surprise being 109.47%. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

FedNat and subsidiaries engage in insurance underwriting, distribution and claims processing business in the United States. The company is a Zacks #2 Ranked player and pulled off average trailing four-quarter positive surprise of 44.87%.

Virtu Financial provides market making and liquidity services to the financial markets worldwide.  The company came up with average four-quarter beat of 17.56%. It has a Zacks Rank of 2.

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