Smartpay (ASX:SMP) share price lifts on fourth quarter trading update

The Smartpay Holdings Ltd (ASX: SMP) share price is lifting this afternoon. Here’s a look at the quarterly update setting the move in motion.

| More on:
jump in asx share price represented by man jumping in the air in celebration

Image source: Getty Images

The Smartpay Holdings Ltd (ASX: SMP) share price has jumped in afternoon trade after the payment technology company released its trading update for the fourth quarter.

At the time of writing, the Smartpay share price is trading at 92.5 cents a share, an increase of 4.5%.

High growth story continues

It appears the payment solution providers’ trading update has fallen roughly in line with shareholder expectations. Despite the continuation of growth metrics, the Smartpay share price has failed to gain momentum.

The company’s fourth quarter, ending 31 March, experienced continued growth in Australian acquiring revenues. Smartpay delivered a 97% year-on-year revenue increase to $5.784 million – a further 15% increase on the previous quarter.

Additionally, Smartpay’s transacting terminals reached record levels. At the end of March, the company’s payment terminals in use reached 6,754 – up from 5,775 from the previous quarter.

Total quarterly revenue for the company came in at NZ$10.05 million on a consolidated basis for both Australia and New Zealand operations. This reflects an increase of 36% year-on-year for the business.

Potentially disappointing shareholders, the company did not indicate growth in its New Zealand operations. Instead, Smartpay stated, “Our New Zealand business provided stable and consistent revenue contribution through the quarter.”

Context is important for Smartpay share price

Smartpay is a much smaller peer of ASX-listed Tyro Payments Ltd (ASX: TYR). Comparing the two competitors we can see how Smartpay is stacking up.

Based on current metrics, Tyro is generating roughly 7.1 times more revenue than its smaller contender. However, the company is utilising 10.1 times more transacting terminals than Smartpay to do so, at 68,338.

Adding to this, despite only accruing sevenfold the revenue, Tyro is valued at 9.7 times the market capitalisation of Smartpay. This might explain why the returns from the Smartpay share price have outpaced its bigger competitor over the last year (108% versus 38.6%).

The market might be imposing a discount on the smaller terminal provider, given the heightened risk profile. This risk was displayed during the COVID-19 crash, as the Smartpay share price fell dramatically 64% in one month.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for more than eight years has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

Scott just revealed what he believes could be the five best ASX stocks for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now.

*Returns as of August 16th 2021

Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Tyro Payments. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

More on Growth Shares