The Tyro Payments Ltd (ASX: TYR) share price has had a tough time in recent months. But could the payments business be a buy?
Since the start of 2021, Tyro shares have fallen around 14%. But over the last six months it has actually dropped by 25%.
Image source: Getty Images
Why is the Tyro share price suffering?
Whilst only the sellers of Tyro shares know why they sold at the price they did, Jun Bei Liu from Tribeca had a go at explaining what might be going on in an episode of Livewire.
She put the blame on a recent update, with management not giving enough details about the contract with Bendigo and Adelaide Bank Ltd (ASX: BEN) regarding the margins and so on.
Jun Bei Liu also noted that numerous unprofitable technology businesses have been sold off in recent times, with Tyro getting caught up in that. Other payment companies like Zip Co Ltd (ASX: Z1P) have dropped, it's down 33% over the last six months and Afterpay Ltd (ASX: APT) is down 28% over the last four months.
However, she decided to say that Tyro was a 'hold', rather than a buy or a sell, because earnings are still doing "well", it's recovering from lockdowns and there are expectations for significant growth.
James Gerrish from Market Matters was more optimistic, saying the Tyro Payments share price was a buy, saying that the current issues are only short-term. He pointed out that the total transaction value is still increasing at a fast rate. Looking ahead for the next year, he sees potential.
How fast is the company growing?
As mentioned by Mr Gerrish, the business is still growing at a quick double digit pace.
Tyro's latest weekly update showed that December transaction value growth to 10 December 2021 was 40% to $1.17 billion. The FY22 year to date growth had been 30%, with the transaction value in the financial year so far being $13.5 billion.
In a recent presentation, the business said it's growing its annual transaction value at five times the speed of the total card payments in Australia.
The payments business said it's well positioned to continue to accelerate growth. Tailored payment solutions are attractive for merchants according to the business and drives transaction value growth.
Looking at new merchant applications, each month between July 2021 to October 2021 showed at least 1,100 merchant applications.
Management said that it has multiple growth levers to materially increase its market share over the medium-term. This may end up helping the Tyro share price in time as well.
Tyro says that future growth drivers includes adding new verticals, increasing its share in existing verticals and increasing the share of its total addressable market. Operating leverage is expected to improve as the platform continues to scale, which will assist and underpin earnings before interest, tax, depreciation and amortisation (EBITDA) growth and margin expansion.
