Payoneer’s 29.9% return over the past six months has outpaced the S&P 500 by 20.9%, and its stock price has climbed to $7.02 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.
Is there a buying opportunity in Payoneer, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Payoneer Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are two reasons you should be careful with PAYO, plus one stock we’d rather own.
1. Recent EPS Growth Below Our Standards
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Payoneer’s EPS grew at a weak 4.8% compounded annual growth rate over the last two years, lower than its 11% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
2. Previous Growth Initiatives Haven’t Impressed
Return on equity, or ROE, quantifies financial firm profitability relative to shareholder equity — an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, Payoneer has averaged an ROE of 7.3%, uninspiring for a company operating in a sector where the average shakes out around 10%.
Final Judgment
Payoneer isn’t a terrible business, but it isn’t one of our picks. With its shares topping the market in recent months, the stock trades at 25.2× forward P/E (or $7.02 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. Let us point you toward the Amazon and PayPal of Latin America.
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