Big moves in a stock price over a short space of time usually indicate the company has a lot of positive momentum behind it. So, when I saw a FTSE 250 firm that has rocketed higher in recent weeks, it caught my attention. Here’s what I think has triggered the move, along with where things could head from here.
A low-key player
I’m talking about road transportation payments specialist WAG Payment Solutions (LSE:WPS). It trades as Eurowag, which may be a more recognisable name to some people. The firm offers payment solutions, with fuel and toll payment cards accepted at over 15,500 locations across Europe. Further, it has a handy app that contains telematics, navigation, tax refunds, fleet management, and truck park access.
It makes money in two key ways. On the payment side, it charges a transaction fee, so the more people use it, the more money it generates. On the mobility solutions side, it charges a subscription and service fee. In both ways, it’s a fairly reliable and low-risk way of making money.
Reasons for the jump
No company-specific information was released over the past month. However, I think some of the move can be attributed to the strong financial results from earlier in Q2. Net revenue grew by 14% versus the previous year, and a high adjusted EBIDTA margin of 41.6% meant that it posted an €11.7m profit before tax. This was significantly better than the loss of over €100m in the last year.
The business is also starting to feel the benefit of the 2023 acquisitions of Grupa Inelo and the majority ownership of FireTMS digital fleet solutions. The chair commented, “Eurowag has gained an additional mission-critical product with every new acquisition”. Clearly, investors are excited about what this could mean financially in 2025 and beyond.
Another key factor was recommendations from leading banks. In the last month, both Jefferies and Citi analysts have given the stock a Buy rating. From the current level of 87p, the institutions’ 12-month price targets are 103p and 98p, respectively. Some see such recommendations as a good reason to buy the stock.
My outlook
With the recent jump, the price-to-earnings ratio is 17.98. This is above the figure of 10 that I use as a fair value benchmark, so I wouldn’t be keen to buy based purely on valuation.
One concern is whether we see heightened geopolitical and regulatory risk in Europe. Operating across Europe exposes Eurowag to regulatory changes in tolling, emissions, and transport policy.
Even with this concern, I like the stable and reliable nature of its business operations. It doesn’t try to do anything fancy but provides products and services that the transportation sector needs. Therefore, I think it’s a growth stock for investors to consider.
