Investing in the Middle East and Africa

Network International Holdings (LSE:NETW) is listed on the London Stock Exchange, but it generates its revenue from the Middle East and Africa primarily, and much of its executive leadership is from these regions. It offers a full range of payment processing tools, including credit and debit card processing, mobile and online payment services, and merchant acquiring solutions.

Over the past three years, it has been growing its earnings at a rate that puts it in the top 5% of 2,000 companies in the software industry. As earnings are one of the core drivers of appreciation in share price, its recent results are promising.

However, I’ve noticed that this company doesn’t have a very good balance sheet. The reason I say this is that it has a lot of liabilities. This makes the firm slightly more vulnerable in the case of economic hardship. For example, it could have to take on more debt, making the balance sheet even worse and affecting its ability to finance future growth due to having to prioritize the repayments of its debts.

Analysts are expecting high growth

I’d like to emphasise the high growth I think the company could deliver. Analysts’ forecast that Network International will grow its earnings at a compound annual growth rate of around 50% a year from 2023 to 2026. That’s exceptionally fast if it does come true.

I think the organisation could have a very strong future ahead of it. However, to date, the results haven’t been ideal. Since its initial public offering in 2019, the shares have lost nearly 40% in price. And it hasn’t reported stable earnings growth if I look back as far as 2016. It’s only since 2020 that things have really started to pick up for the company. I wonder if it will be able to maintain the growth it has had in the last few years. I have to say, I find this somewhat unlikely because the firm was founded in 1994 and is still having periods of earnings contraction.

Are the shares good value for money?

The company valuation indicates that investors understand that Network International could have a strong future ahead of it. At the moment, its price-to-earnings ratio is around 40. In my opinion, that’s too high and would expose me to a lot of risk if I were to invest. Therefore, I think there’s a chance that if I bought the shares, I could be in for a turbulent ride. Investments that have the potential to act like that aren’t really my kind of thing.

As I mentioned in my introduction, I’m much more suited to slow, stable, and lower-risk firms. I don’t think this company meets my criteria. Therefore, I’m not going to invest in it right now.

The post Analysts are expecting high growth from this FTSE 250 company appeared first on The Motley Fool UK.

A tech stock from the UAE

The business in focus is Network International Holdings (LSE:NETW). Even though it’s listed here in London, it serves the Middle East and African markets. The primary offer is payment solutions for businesses and financial intermediaries. This includes online payment software and card issuance and processing.

Network International has been growing in recent years, and commands a 50% market share in the UAE and Jordan. Even in the latest trading update, it held to the 2023 full-year projection of high-teen percentage revenue growth.

The performance naturally has put the stock on peoples’ radar. Yet this isn’t just with the retail crowd, bigger fish have also been circling!

Takeover bids announced

Back in April, the share price jumped over 20% in a day following confirmation that private equity firms were interested in a possible takeover bid at 387p a share. Another non-binding bid at 400p came in from an asset management firm.

Last month, the management team accepted the 400p bid. There are still plenty of points to iron out on the deal, as shareholders can choose to receive the 400p in cash or convert the shareholding to another company.

Since April, the share price has been moving higher and higher and currently sits at 385p. Clearly, this makes sense. Why would the stock trade at 300p if I could buy it and then receive 400p from the takeover bid?

Working smarter, not harder

Even though there’s some small probability everything doesn’t go to plan (hence why the stock isn’t quite trading at 400p), I’m staying away.

There isn’t much for me to gain here and I’ve missed the boat. The share price gain on a chart looks incredibly impressive, but the reality is there won’t be another 100% gain over the next year for me to jump on.

To me, this highlights the importance of researching a stock before deciding to jump in and invest. Yet it doesn’t all spell bad news. This might not be the opportunity, but it tells me that institutional buyers see bargains in the market right now.

I agree with them, and feel there are other tech companies listed in the UK that warrant attention. One example I like at the moment is Beeks Financial Cloud Group. I feel the upside potential here is high (with no chatter of a takeover at the moment!).

The post This FTSE 250 stock has doubled in value, but I’m not buying appeared first on The Motley Fool UK.