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Paymentus Holdings, Inc. (PAY) Hits Fresh High: Is There Still Room to Run?

Shares of Paymentus (PAY) have been strong performers lately, with the stock up 15.7% over the past month. The stock hit a new 52-week high of $17.74 in the previous session. Paymentus has gained 110.5% since the start of the year compared to the 15.2% move for the Zacks Business Services sector and the 38.1% return for the Zacks Technology Services industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on November 6, 2023, Paymentus reported EPS of $0.09 versus consensus estimate of $0.03.

For the current fiscal year, Paymentus is expected to post earnings of $0.20 per share on $607.56 million in revenues. This represents a 185.71% change in EPS on a 22.25% change in revenues. For the next fiscal year, the company is expected to earn $0.24 per share on $735.32 million in revenues. This represents a year-over-year change of 18.75% and 21.03%, respectively.

Valuation Metrics

Paymentus may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Paymentus has a Value Score of D. The stock's Growth and Momentum Scores are A and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 84.3X current fiscal year EPS estimates, which is a premium to the peer industry average of 24.9X. On a trailing cash flow basis, the stock currently trades at 60.8X versus its peer group's average of 8.1X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Paymentus currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Paymentus passes the test. Thus, it seems as though Paymentus shares could still be poised for more gains ahead.

How Does PAY Stack Up to the Competition?

Shares of PAY have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? One industry peer that looks good is Adeia Inc. (ADEA). ADEA has a Zacks Rank of # 2 (Buy) and a Value Score of A, a Growth Score of D, and a Momentum Score of B.

Earnings were strong last quarter. Adeia Inc. beat our consensus estimate by 46.15%, and for the current fiscal year, ADEA is expected to post earnings of $1.42 per share on revenue of $391.15 million.

Shares of Adeia Inc. have gained 13% over the past month, and currently trade at a forward P/E of 6.93X and a P/CF of 1.41X.

The Technology Services industry is in the top 32% of all the industries we have in our universe, so it looks like there are some nice tailwinds for PAY and ADEA, even beyond their own solid fundamental situation.

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