After cutting problem assets and implementing new management, EML trades at ~5x EBITDA despite historically sticky revenues, double-digit growth, and consistent profitability
Thanks for the write-up. Think the company should be valued at 8x EBITDA really. Don't think they deserve the broken business valuation right now. Decent re-rate today at least
Thanks for reading and for the comment - I don't have an exact multiple target, but I tend to agree with you directionally (i.e. the valuation should be much higher than where it is, particularly given prior 3rd party interest). I guess the pessimism is somewhat understandable in the context of what shareholders have had to endure the last few years, but I think the AGM today helps highlight the strength in the core business (Q1/FY25E in line with expectations, medium-term targets of ~35% EBITDA margins and a double-digit transaction revenue CAGR over the next three years, etc.). Definitely good to see market take notice and re-rate this a bit
Hi Mendo - Thanks for reading and for the comment. Yesterday, EML announced that it was dismissing CEO Ron Hynes less than six months after his appointment, noting that “alternate leadership is required to execute the Company’s strategy.” Current Chair Anthony Hynes (no relation to Ron I believe) will be the new CEO.
The stock price reaction yesterday was somewhat understandable in the context of the history of issues that the Company has seen over the past few years. Of course, any leadership change so soon after appointment can make investors feel like there are deeper issues behind the scenes.
In my view, the CEO change doesn’t impact the thesis I’ve laid out in the write-up above (which seems to be reflected in today’s stock price action/rebound; I’ll of course be watching to see if there is more negative news to come).
Thanks for the write-up. Think the company should be valued at 8x EBITDA really. Don't think they deserve the broken business valuation right now. Decent re-rate today at least
Thanks for reading and for the comment - I don't have an exact multiple target, but I tend to agree with you directionally (i.e. the valuation should be much higher than where it is, particularly given prior 3rd party interest). I guess the pessimism is somewhat understandable in the context of what shareholders have had to endure the last few years, but I think the AGM today helps highlight the strength in the core business (Q1/FY25E in line with expectations, medium-term targets of ~35% EBITDA margins and a double-digit transaction revenue CAGR over the next three years, etc.). Definitely good to see market take notice and re-rate this a bit
interesting article and stock.
But what is the reason for recent crash of share price? Change in management or/and results?
If it is the former, what happened that there was a 22% slump?
Hi Mendo - Thanks for reading and for the comment. Yesterday, EML announced that it was dismissing CEO Ron Hynes less than six months after his appointment, noting that “alternate leadership is required to execute the Company’s strategy.” Current Chair Anthony Hynes (no relation to Ron I believe) will be the new CEO.
The stock price reaction yesterday was somewhat understandable in the context of the history of issues that the Company has seen over the past few years. Of course, any leadership change so soon after appointment can make investors feel like there are deeper issues behind the scenes.
In my view, the CEO change doesn’t impact the thesis I’ve laid out in the write-up above (which seems to be reflected in today’s stock price action/rebound; I’ll of course be watching to see if there is more negative news to come).
Of note, the Company reiterated FY25E EBTIDA guidance and saw very strong Q1 FY25 results recently (https://x.com/RohanSoor/status/1861246272176308318). For what it’s worth, the new CEO recently made a large open-market purchase of shares (https://emlpayments-stagingcms.bla.bio/wp-content/uploads/2024/10/2924-02870794-2A1557557.pdf) and himself has had a successful career in the payments space with multiple start-ups and exits (https://www.linkedin.com/in/anthonyhynes/?originalSubdomain=au).
Hope that helps, feel free to let me know if any other questions.
Nice write-up, enjoyed reading it.
Thanks for reading! Appreciate the comment
Going to add this our Best Stock Pitches newsletter, published this coming Saturday.
That would be great, thank you! Looking forward to seeing it