Quick Summary

Euronet Worldwide (EEFT) is an electronic payment services company. Its largest segment by operating profit is EFT (electronic financial transactions) Processing, accounting for 57% of profits and 32% of revenues. EFT consists of a network of over 46,000 ATMs and 330,000 point-of-sale terminals at retailers, with Euronet collecting fees on all transactions conducted through them. The second-largest segment is Money Transfer, with 26% of profits and 40% of revenue. This segment consists of the Ria and HiFX branded money transfer platforms, with Ria notably being behind Walmart's money transfer services. Overall, the company has 397,000 money transfer locations across 160 countries. Lastly is ePay (17% of profits, 30% of sales), a virtual card terminal that processes Internet-based transactions such as mobile prepaid services, online bill payments, digital gift cards, etc. Euronet processed over 4.7 billion transactions in total in 2019.

Does The Company Have Recurring And/Or Rising Revenues?

SOMEWHAT. Payment processing is a classic recurring revenue business, with Euronet processing over a billion transactions every quarter. The company just crosses our "rising" threshold of 10% revenue growth, posting an average annual revenue growth rate of 12% over the past 3 years. Rapid growth in the EFT segment (over 20%) has come from a build-out and acquisitions adding to the ATM footprint, particularly in Europe and India, and money transfer has posted decent growth rates as well, due mainly to the Walmart partnership (although this is leveling off rapidly). Further growth should continue to come primarily from EFT, although we may need to see another substantial segment-level purchase to really see attractive growth going forward. Also, the company has seen 20%+ revenue declines in 2020 due to COVID, as shoppers avoid physical retail and cash in general as sales have moved online. A substantial sustained shift in buyer habits to online would be a serious negative to Euronet's business.

Does The Company Have Durable Competitive Advantages?

NO. The money transfer business has a modest NETWORK EFFECT at about half the size of Western Union and MoneyGram, but the real advantage is the exclusive deal with Walmart, which is not a reliable long-term one. The EFT and ePay segments we don't see any particular moat factors, as it is relatively easy for cash grabbers to use any ATM or virtual card terminal. Additionally, COVID-19 is driving a substantial shift in buyer habits to online purchases. If this trend holds long-term, the effects would be quite negative to Euronet, as the bulk of the business is built on in-store and cash spend.

GreenDot Rating: YELLOW (weak)

Euronet is an odd combination of different payment services, all of which have good recurring revenue characteristics and decent growth potential, but little in the way of long-term competitive advantages. Additionally, we think changes in buyer habits due to COVID-19 could prove to be sustained long-term, which would be another negative. Generally, payment processing companies have proven attractive investments, but there is enough here to raise concerns. We give it a "weak" YELLOW (negative) rating. It is not truly a "bad" business, just one that doesn't have a lot going for it in the near-to-medium term.