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Until very recently, I absolutely despised how my county handled its billing.

Every quarter, there is a water/sewer bill to pay, and once a year, of course, there are property taxes. The problem was that the options for paying these were sparse. I could write a check (which is inconvenient and, frankly, expensive), or I could use a horrid payment portal that was confusing, didn’t work well, and was very limited in payment options.

This all changed at the start of this year with a much better—excellent, even—payment portal, which offered a lot of niceties like Apple Pay and integration with my bank’s bill pay system, allowing me to automate the whole process. What a difference!

It turns out that payment portal was from Paymentus (PAY), and I was pleasantly surprised to realize that this company is also a current Green Screen stock. With some anecdotal research done and a cursory overview turning up no red flags, let’s take a closer look at this interesting stock.

The Business

Paymentus provides a cloud-based bill payment platform, allowing customers to electronically bill payers, process payments via almost any channel you can think of (credit card, debit card, ACH, digital wallet, Apple/Google Pay, etc.), notify customers, and integrate with a variety of ERP back ends from popular providers like Microsoft, SAP, and Oracle. It can be used for virtually any billing scenario: small businesses, large businesses, business-to-consumer billing, business-to-business billing, payouts, and more. It can also be accessed from almost any payment device: smartphone, computer, point-of-sale terminal, self-service kiosk, chat app—you name it.

Paymentus’ primary clients are institutional billers in the utility, insurance, government, telecom, healthcare, and financial services verticals. The firm currently has over 2,500 clients on the billing side and services 25 of the Fortune 500.

The revenue model is pretty easy to understand. Revenue is essentially: (Number of Transactions) × (Fee per Transaction).

Clients can either charge a “convenience fee” to payers, which is passed through to Paymentus, or use an “absorbed fee” model, where the biller pays Paymentus directly. The fee structure varies—in some cases it is a flat fee, and in others it is a percentage of the bill. In 2025, the firm is expected to process well over 600 million transactions.

A pretty simple business to understand—just how we like it.

Revenue Growth and Recurrence

This is a classic “toll booth” revenue model, as Paymentus is paid for every single bill it processes. For each individual client, that can amount to hundreds of bills per day! The “toll booth” model is one of the classic recurring revenue setups, so Paymentus passes the recurring revenue test with flying colors. The fact that most of the firm’s clients bill for recurring, non-discretionary services is icing on the cake that sweetens the deal even further.

Growth has been very strong. The three-year CAGR is over 30%, and 2025 revenue is expected to grow by more than 35%. The company is showing no signs of slowing down. Analysts expect continued 20–25% annual growth over the next five-plus years. Long term, there is still a large addressable market. In the U.S., over 16.8 billion bills are paid annually, and Paymentus processes less than 4% of them. If the company can continue expanding both within its current niches and into new ones, the growth potential here is long-tailed. With such an extensible product, I can see it doing just that.

Simply put, Paymentus passes both the revenue growth and recurrence tests easily.

Moat

As with any service that is critical to its clients’ operations (as Paymentus clearly is), switching costs are significant. Invoicing, taking payments, automating accounting, and communicating with customers are all core functions that the platform handles. Switching becomes painful from a time, money, and risk perspective—especially when factoring in the bureaucratic risk that comes with large customers in the utility, telecom, and government sectors.

I touched on this earlier, but the non-discretionary nature of Paymentus’ clients is another bonus. Even if the economy takes a downturn, electric bills, water bills, property taxes, and insurance premiums still need to be paid. This helps insulate Paymentus from wild swings in transaction volumes.

While the firm doesn’t directly report retention metrics, we can infer from its revenue growth relative to transaction growth—which is nearly 2×—that net retention is likely very strong.

That’s not to say that Paymentus has an unassailable moat. I would characterize it as “narrow” rather than “wide.” There is a lot of competition in the field (more on this later), and the payments market continues to evolve rapidly.

Management and Financials

Paymentus is led by founder and CEO Dushyant Sharma, who founded the company in 2004 and continues to hold a 15% ownership stake, currently worth nearly $700 million. In a competitive market, he has built a rapidly growing, debt-free, and cash-profitable (~9% FCF margin) business. I also like the fact that Paymentus has kept share dilution under control, with less than 3% annual dilution in each of the past three years. That’s quite rare for a growth company and helps protect the economic interests of public shareholders.

At 56, Sharma is no “boy founder,” but neither is he approaching mandatory retirement. He likely has a decade or more of leadership ahead of him, should he choose to continue running the company. Paymentus appears to be in good hands and is financially strong.

Risks

For me, the biggest risk by far is competition and its impact on Paymentus’ ability to meet growth expectations. Bill pay is a crowded field. Global giants like Fiserv (FISV) and ACI Worldwide (ACIW) (via its Speedpay product) offer directly competing platforms in many of the same verticals as Paymentus. As the company tries to expand into new industries, it will also face competition from the major credit card networks, banks’ billing platforms, and in-house systems developed by large telecom and media companies.

Competition can cap pricing power, make new customer wins slower and more expensive, and increase customer acquisition costs. Should competitive pressures intensify and dilute Paymentus’ revenue growth, the target fair value estimate could prove to be overly optimistic.

Other risks are typical for software platforms that handle sensitive information. Cybersecurity breaches and poor system availability are two issues that could materially damage the company’s reputation if not managed carefully.

Conclusion

Paymentus passes all of the tests. It has nearly 100% recurring revenue through a “toll booth” model, is growing rapidly in a large addressable market, benefits from meaningful switching costs, is led by a founder CEO, and is financially solid. While there are risks to be aware of, they are not particularly unique to this business. In my view, Paymentus clears the bar as a “green dot” stock.

So, what is it worth? Modeling low-20% revenue growth over the next five years, combined with roughly 2% dilution, an 11.5% free cash flow margin, and a relatively high 11.5% discount rate, I arrive at a fair value of about $34 per share. The stock currently trades just below $30, making it buyable—but not yet at the 25% margin of safety we look for. As a result, Paymentus will remain on the Watch List until we see a more attractive entry price.

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