The EML Payments Ltd (ASX: EML) share price looks like an attractive opportunity to plenty of analysts at the moment.
EML is a financial technology (fintech) company that powers many different types of payments including physical card cards, electronic gift cards, virtual bank accounts, salary packaging, gaming payouts, buy now pay later (BNPL) and so on.
At the moment, there are at least three different brokers that like EML as an investment with potential.
One of those with a buy rating on the fintech stock is UBS. Its price target is $4.40. That suggests a possible upside of more than 30% this year if the broker is right.
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What does UBS like about the EML share price?
In May 2021, EML shares took a huge tumble. They fell more than 40% as investors learned the Central Bank of Ireland (CBI) was concerned about EML's processes, compliance and risk management in regarding anti-money laundering and counter-terrorism financing (AML/CTF).
It was a potentially painful move because the CBI could have put limits on EML's Irish business, as well as having various other impacts. The EML entity, PFS Card Services (Ireland) Limited (PCSIL), is responsible for substantial payment volume.
However, near the end of November, EML delivered good news regarding the CBI investigation, which UBS said took a lot of risk off the table.
The CBI said that it will permit PCSIL to sign new customers and launch new programs whilst staying within the material growth restrictions. PCSIL is confident that it can meet these obligations.
Further, broad based reductions in limit controls on programs will not be imposed. The CBI is satisfied to continue to engage with PCSIL with a view to agreeing appropriate limits under its risk management and controls framework.
The CBI did say it intended to implement a material growth limitation over PCSIL's total payment volumes which will be imposed for 12 months, or rescinded earlier. This follows third party verification to confirm PCSIL's remediation plan has been effectively implemented. PCSIL has been removing higher volume, lower yielding programs to enable it to comply with a material growth restriction.
The broker says that EML will be able to achieve more customer growth thanks to this latest update, which should help grow the business.
How quickly is EML growing?
Investors often like to look at the growth rate, and expected growth rate, of a business before deciding what to value it at. So, faster growth could be useful for the EML share price.
In FY21, gross debit volume (GDV) rose 42% to $19.7 billion and underlying net profit after tax (NPATA) increased 54% to $32.4 million.
Then, in the first quarter of FY22, GDV increased another 14% to $5.5 billion year on year. Revenue was up another 29% to $52.4 million and underlying net profit was up 41% to $4.6 million.
It continues to win new clients and process more volume for existing clients.
What is the EML share price valuation?
Based on the UBS numbers, EML is valued at 27x FY23's estimated earnings.
