Ebix Stock: An Affordable Bet on the Fast-Growing Fintech Industry

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If you want to take advantage of the rapid growth $160 billion fintech industry, consider going long on Ebix, Inc. (NASDAQ: EBIX). The -44.80% price drop made EBIX very affordable. It is now trading below $20, well below its 52-week high of $44.42.

EBIX stock performance chart

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Ebix’s market cap is now below $610 million. Just over four years ago, EBIX’s market capitalization was greater than $2.7 billion. Ebix is ​​a fallen angel, he could be a future takeover target for major fintech companies.

Yes, EBIX could be a knife that falls with many tickers. The Dow chart below shows that Ebix’s trading performance may not be the issue. Emotional investors drive the stock market down in general. Even the largest fintech company, Visa (V), is showing a six-month price return of -18.21%.

dow chart bear market 2022

CNBC.com

Don’t be intimidated by big dips

Thanks to the universal fear and panic in the stock market, EBIX could be bought at just 7.12x the forward P/E. The opportunity here can be illuminated by carefully studying the table below.

ebix relative undervaluation

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EBIX is a perfect value play as its forward valuation is 65% below the average of its industry peers. The TTM Price/Sales valuation of software solutions provider Ebix is ​​just 0.61, 77% below the average of its peers.

I think the significant undervaluation of EBIX is unfair. The net profit margin of this company is 6.97%, which is 66.7% higher than its industry peers. Ebix Inc. is consistently profitable since 2010. Consistent profitability in a highly competitive and crowded industry should be rewarded.

EBIX is a consistently profitable chart

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The negativity on EBIX could be because its 5-year net income margin was 16.84%. What I remember is that fierce competition forces him to engage in a price war to win more customers. Lower fees for its fintech software solutions are underscored by Ebix’s 31% TTM gross profit margin. This is again significantly below its 5-year average of 54.27%. These lower margins are forgivable. Sacrificing gross/net margins to gain or protect market share is a valid business tactic in my opinion.

Ebix is ​​a small fish in competition with giants like Visa or PayPal (PYPL). Lower prices are an easy way for Ebix to attract customers away from its much larger competitors. Additionally, growth-oriented investors likely know that smaller companies have greater growth potential than companies like Visa. Therefore, Ebix outperforming the growth rates of its bigger rivals should attract more bulls.

Too many business segments is not ideal

Ebix’s hugely diverse software solutions are confusing. A small company that dips into so many pies probably isn’t very appealing to defensive investors. However, I think this company’s varied services and partners mean its growth is almost assured.

ebix array of its many business channels

ebix.com

Ebix could probably go back to posting a revenue CAGR above 15% if only management started to focus on its most promising channels. My decades as an independent multimedia artist have taught me that focusing on 2 or 3 markets is the best way to make money.

EBIX has a 5-year median revenue CAGR of 25.39%. Unfortunately, it is only 9.07%, less than Visa’s 24% and PayPal’s 10.66%. The fault with the star of EBIX could be too diversified a range of products. This company was founded in 1976 and yet it never became a $5 billion company. This can be partly blamed on too many business segments in my opinion.

ebix businesses and products

ebix.com

The R&D and marketing costs of so many services/solutions could also be the reason for its low gross margin of 31%. A laser focus on insurance and financing channels is desirable. There is no urgent need for this travel solution and education channels. I think they should be sold to strengthen the insurance, finance and advisory channels.

On the other hand, having so many business segments could also be the reason why it continues to survive. My takeaway is that a streamlined product portfolio could increase Ebix’s market share in the fintech space. The 20.3% CAGR of this particular business could continue to attract large companies and startups.

Global fintech market size and forecast

Allied Market Research

EbixCash is very promising

My favorite reason to endorse this stock is EbixCash. Low digital transaction/remittance fees end up adding up to a substantial amount. EbixCash only needs to attract a sufficient number of customers.

EbixCash is tall in India. This is very important because India knows exponential growth in fintech services. India’s fintech technology services market is estimated to generate $200 billion in revenue and $1 trillion in assets under management (assets under management by 2030).

ebixcash is big in india

ebixcash.com

These 650,000 outlets in India make EbixCash a very important player in local and cross-border remittances and digital payments in India. India remains the leading country in the world in terms of international remittances received. It received 89 billion in incoming money transfers.

Ebix Payment Services Pvt. Ltd is the money transfer technology partner of Western Union (WU), MoneyGram (MGI), Ria Money, Transfast and Xpress Money. Ebix is ​​also the incoming money transfer technology animator for all aforementioned partners in other countries.

Conclusion

EBIX is significantly undervalued compared to its industry peers. Bargain hunters looking for growth stocks should consider EBIX. My reservation against Ebix’s many business channels does not detract from my belief that this is a worthy bet on fintech.

Technical indicators indicate that EBIX is heading towards more dips. Better to wait and let go before going long.

Ebix Inc. has a Piotroski score of 5, so it could be a safe long-term investment. Shares of this company could rebound next year if they post a double-digit revenue growth rate. Going forward, Ebix will still have the handicap of lower gross margins compared to giants like PYPL and V. Its small size means it has to use lower prices to retain and attract customers.

ebix is ​​a safe investment

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Going long on EBIX while it is trading below $20 could prove very profitable. Ebix’s huge presence in India and its low valuation make it a very attractive takeover price. PayPal has $9.31 billion in cash. It can afford to offer $1.5 or $2 billion to acquire 100% of Ebix Inc. Even at a price of $2 billion, PayPal would only pay at a 2x P/S valuation. Adobe (ADBE) buys Figma at a valuation of 50x P/S.

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