Afterpay Ltd (ASX: APT) is the ASX fairytale story of recent times.
After listing at $1 per share, those lucky enough to put in $10,000 during the 2016 initial public offering would now be sitting on $1.2 million.
So it's no surprise the last few years have seen a whole bunch of buy now, pay later and 'something-pay' companies floating on the ASX.
But most of them are early-stage businesses burning cash and not yet turning a profit. Not to mention competing in a hot sector that sees a new rival pop up almost each month.
Even the market leader Afterpay doesn't currently make any money. It's still concentrating on spending capital to try to grow faster than its rivals.
But there is one battler with a market capitalisation of just $105 million that's bucking the trend: Earlypay Ltd (ASX: EPY).
Earlypay is actually making money
Earlypay's clientele is businesses, rather than end consumers. The North Sydney company sells products like line-of-credit and equipment finance.
According to Burman Invest chief investment officer Julia Lee, Earlypay seems to be doing everything right.
"When you have a look at anything with 'pay' in it, usually it's not making a profit. But this one actually is," she told SwitzerTV Investing this week.
"This year, they're actually forecasting a net profit after tax and amortisation of above $8.5 million… Next year they're forecasting a net profit after tax and amortisation around about $12 million — so almost 50% growth there."
Not only is the company earning more than it spends, but the share price is attractive at the moment.
"PE multiples in this space are commonly above 80 or 100 times. But this one's trading at around about 20 times historical," Lee said.
"And you've got a dividend yield of about 5% as well."
The Earlypay share price was trading at 45 cents per share at market close on Tuesday, which is 4.26% down for the day. The stock is up 18.4% for the year.
"We usually don't track smaller companies like this. But having a quick look through some of the numbers… the numbers don't look too bad in the type of market that we're in."
But Earlypay has these headwinds…
Tribeca Investment Partners portfolio manager Jun Bei Liu disagrees with Lee, indicating she would stay away from Earlypay.
The fear is that interest rates would rise due to post-COVID inflation.
"My view is that a lot of those financing businesses, when you have bond yields start moving higher it's not in a great environment for these guys to do business," she said.
"It is well-funded and exposed to the SME [small to medium enterprise] space — it will have a little bit of growth. But it's not something that I would rush into."
Earlypay just last week announced it would raise $18.75 million through the issue of almost 45 million new shares.
