Why Shift4 Payouts Are Up Over 10% This Week

Actions of Shift4 Payments (FOUR -0.46%) rose more than 10% this week, according to data from S&P Global Market Intelligence. The hospitality and entertainment-focused payments processor grew its revenue and earnings at a brisk pace once again in the second quarter. Through its acquisition strategy and international expansion, the company hopes to maintain this impressive growth in the coming years.

As of 3:17 PM ET on Friday, August 16th, shares of Shift4 Payments are up 13.9% this week and 41.5% over the past year. Here’s why.

Earn on the underlying markets

Shift4 Payments processes billions of dollars in payments for restaurants and entertainment venues. Digital Processor was founded by Jared Isaacman when he was 16 (not a typo) in 1999 and has grown organically and through acquisitions over the years. Last quarter, the company processed $40.1 billion in payments, up from $26.8 billion in the same quarter a year ago and $4.2 billion in the second quarter of 2020. This 10x growth in just a few years represents a compound annual growth rate (CAGR) of 75% for payment processing, making it one of the fastest growing companies in the sector.

Revenue and earnings followed suit. Revenue rose 30% from last year to $827 million, with net income of $54.5 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) of 162.4 millions of dollars. Even as it invests heavily for growth, Shift4 Payments has managed to remain profitable.

Management highlighted some big recent wins, including the Nobu hotel and the Chicago Bears football stadium. Its product offering is aimed at restaurants, hotels and entertainment venues. These locations are unique and can process tons of payments in a short amount of time, which means they need specific products versus a general payments offering. It looks like Shift4 is proving to be the company that provides these services.

The stock still doesn’t look expensive

Even though it processes $40 billion in payments each quarter, Shift4 Payments management still believes it has a long way to go. It hopes to expand into more international markets and deepen its penetration into hotels and sports venues, as well as maintain its acquisition strategy.

The stock currently trades at a forward price-to-earnings (P/E) ratio of just 21.5, which is below S&P 500 market average of 28. The company is growing much faster than the market average. Investors who believe in the long-term growth story of Shift4 Payments may buy some shares at these prices, even after this week’s price increase.