The Tyro Payments Ltd (ASX: TYR) share price has sunk 46% since the start of 2022.
From the 2 November 2021, the payments business has actually sunk by 61%.
Fund manager Chris Prunty from QVG Capital outlined to Livewire why Tyro Payments could actually be a promising idea.
What does it do?
Tyro may not be a household name (yet?), but the company is used by thousands of small businesses around the country. It provides payment terminals for businesses like cafes and retailers.
What has happened to the Tyro share price?
Many analysts judged that the company didn't perform to expectations in the first half of FY22.
Half-year transaction value grew by 30.6% to $15.8 billion, revenue rose 29.9% to $149.2 million and payments gross profit (before the Bendigo and Adelaide Bank Ltd (ASX: BEN) profit share) grew 25.4% to $68.1 million. However, statutory gross profit only increased 16.3%. The 'normalised' earnings before interest and tax (EBIT) sank 322.2% to a loss of $10.9 million and the statutory loss before tax worsened by 430% to $18.1 million.
Ord Minnett and Morgans both rate the business as a buy, but noted that margins and costs were worse than expected. Brokers are expecting growth from the business.
Why is the Tyro share price an opportunity?
Speaking to Livewire, Mr Prunty believes that Tyro is going to be profitable next year and also start generating free cash flow. This may mean that more investors start looking at the business, particularly the ones that exclude unprofitable businesses from their watchlist.
He said that to some investors it looks "untouchable", but when it does get to profitability, then "that future could look quite different".
How is the company's most recent trading activity going?
Whilst margins aren't what some investors were expecting in the first half, Tyro does continue to grow.
In January, the business saw its transaction value increase by 35% year on year to $2.7 billion. E-commerce transactions are growing quickly from a small base, growing 836% to $36.5 million. The payments business saw a gross profit of $11.1 million, up 24%. In its banking business, loan originations in the first seven weeks of 2022 were $5.8 million – up 1,099%.
The February growth was even faster. Transaction value up to 18 February was up 50% on the same period last year to $1.8 billion.
Tyro share price snapshot
Over the last year, Tyro shares have fallen by 51%.
