EVO Payments Inc EVOP’s strong organic growth outlook, free cash flow generation and M&A prospects give the stock a high risk-reward profile at current trading multiples, according to William Blair.
The Analyst
Robert Napoli of William Blair initiated coverage on EVO with an Outperform rating.
The Thesis
Strong secular tailwinds — including the shift to electronic payments — along with EVO’s exposure to high-growth markets should drive low double-digit to mid-teens revenue growth, Napoli said in a Monday note.
EVO’s margin expansion target of 50-75 bps per year appears reasonable, as the company’s internal initiatives such as platform consolidation efforts, improved procurement and the integration of acquired businesses will drive “sustainable improvement," the analyst said.
The company’s strong free cash flow generation will likely be used to deleverage or support acquisitions, which will continue to drive growth, Napoli said.
“Consistent with history, we believe M&A will remain a key strategy for management and will supplement organic growth."
Price Action
EVO shares were trading down 4.24 percent to $22.02 at the time of publication Monday.
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