Why the EML Payments Ltd share price just hit a 52-week low

The EML Payments Ltd (ASX: EML) share price hit a 52-week low today after the payments service business recently handed in a weaker-than-expected profit loss of $2.03 million for the half-year ending December 31 2017.

For the period the group posted earnings before depreciation and amortisation (EBTA) of $13.5 million on revenue of $38.24 million. Around 90% of that revenue can be classified as recurring according to the group.

However, it also recorded an operating cash loss of $3.36 million, versus an inflow of $9.6 million in the prior corresponding half. The group expects to earn a decent gross profit margin of around 75% over the full year.

EML Payments reports that its “portfolio offers innovative payment technology solutions for payouts, gifts, incentives and rewards, and supplier payments. We issue mobile, virtual and physical card solutions to som e of the largest corporate brands around the world, process billions of dollars in payments each year, and manage more than 1,1 00 programs across 19 countries in North America, Europe and Australia.”

The share price slide is likely on valuation grounds as the group still boasts a market capitalisation around $330 million, despite losing money on a statutory basis for the most recent half-year period. As such it seems the market is adjusting its earnings multiples for a business that is not growing as quickly as originally anticipated.

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Motley Fool contributor Tom Richardson has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Emerchants Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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