Is the stock – which currently trades for just over £1 – worth buying for my own portfolio? Let’s discuss.
A look at the business
Equals offers a range of solutions designed to help organisations and individuals manage their money flows better.
Its brands include:
- Equals Money – A platform that offers multi-currency accounts, international and domestic payments, business expense cards, and more
- Equals Money Solutions – An enterprise version of the Equals Money platform that serves large corporates and financial institutions with complex payments needs
- FairFX – An international payments service designed for high-net-worth individuals and international holidaymakers
- CardOneMoney – A UK-focused product designed to help small businesses and individuals manage everyday account processes (payments, direct debits, etc)
- Equals Connect – A white label platform serving smaller FX providers
It’s worth noting here that several of these services have really good reviews. For example, on Trustpilot, both Equals Money and FairFX have a rating of 4.7. That’s impressive. By contrast, Wise has a rating of 4.2.
Impressive growth track record
Now, doing some research on Equals, a few things stand out to me. Firstly, this is a company with a decent growth track record.
Over the last five years, revenue has climbed from £15.5m to £69.7m. That represents a compound annual growth rate (CAGR) of 35%. For 2023, analysts expect revenue of £95.3m – growth of 37%.
Secondly, the valuation here is not very high. Currently, the forward-looking P/E ratio is only about 15. That seems low given the company’s growth rate.
Additionally, the company recently put itself up for sale.
Earlier this month, Equals advised that after a strategic review, it had contacted a limited number of potential counterparties to assess whether they could put forward a proposal (ie, a bid) that would deliver greater value to shareholders than pursuing a standalone independent strategy.
If a bid was to materialise, it may be at a premium to the current share price.
Should I buy?
While this all sounds pretty positive, I’m going to hold off on buying the growth stock for now.
For a start, a bid may not come in. It’s worth noting here that on one stock forum, a FinTech expert pointed out that Equals’ focus on both businesses and retail consumers could be a sticking point for buyers. Given the firm’s dual focus, it might have to be broken up.
Meanwhile, the company operates in a really competitive space in which it’s hard to create a genuine competitive advantage. And it doesn’t have the track record of profitability that some other players have.
Finally, I already own shares in Alpha Group International, which operates in this industry (and has a better track record in terms of profitability than Equals).
Weighing everything up, I just think there are better opportunities in the stock market for me right now.