The EML Payments Ltd (ASX: EML) share price may be an undervalued opportunity according to some investors.
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What does EML Payments do?
EML says that it provides an innovative payment solutions platform that helps businesses all over the world. Whenever money is in motion, its technology can power the payment process so that money can be moved quickly, conveniently and securely.
Want some examples? The business has three different segments.
One is the 'general purpose reloadable', with use cases like banking as a service, neo-lending, salary packaging and gaming payouts.
Next is 'gift and incentive', with uses like shopping centre gift cards, employer incentives and consumer incentives.
The third segment is 'virtual account numbers' with use cases like commercial payments and buy now, pay later (BNPL).
Recent growth
One of the main things that investors like to look at is the recent growth of the business. Therefore, its performance can have a serious impact on the EML share price. FY21 was the latest annual result released. It was also a record for EML.
FY21 gross debit value (GDV) increased 42% to $19.7 billion, helping revenue increase 60% to $194.2 million. Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) grew 65% to $53.5 million. The underlying net profit after tax (NPATA) rose 54% to $32.4 million.
But that was the latest annual result. Investors have seen more up-to-date numbers with the first quarter of FY22. In the first three months of FY22, GDV grew 14% to $5.5 billion, gross profit increased 20% to $34.4 million and underlying NPATA surged 41% to $4.6 million.
Why might the EML Payments share price be undervalued?
Last year, the market crunched EML shares on concerns that the Central Bank of Ireland (CBI) could significantly hurt EML's European growth based on anti-money laundering and counter-terrorism financing worries. The EML share price is still 37% lower than before that CBI news.
However, in late November it was announced that the CBI will permit EML's European subsidiary to sign new customers and launch new programs, whilst staying within the material growth restrictions. EML is confident that it can meet those obligations. Broad-based reductions will not be imposed.
UBS reckons that EML is now less risky because of the positive update from CBI. The ability to keep on winning customers is positive. EML has been working on removing higher volume, lower-yielding programs to enable it to comply with the material growth restriction.
For UBS, the price target on the EML share price is $4.40. That's around 35% higher than today's price.
Other ASX growth share price targets
Is EML the most undervalued ASX growth share? Well, UBS has a bigger price target upside on other businesses. But that's not to say EML isn't an attractive opportunity.
For example, the Temple & Webster Group Ltd (ASX: TPW) price target from UBS is $11.80 – around 40% more than today. The UBS price target on Adore Beauty Group Ltd (ASX: ABY) is $6 – this implies an upside of around 100%.
