Shift4 Payments (FOUR 3.84%) has been a wild success since its initial public offering in June 2020. As of this writing, shares are up nearly 190% since their debut -- an impressive feat considering this digital payments company's niches are restaurants and hospitality, industries deeply affected by the pandemic.

But those areas of the economy are making a comeback, and Shift4 is too. There's plenty of optimism baked into the company's current valuation, but this emerging digital payments leader is nonetheless worth a look.

Not (quite) firing on all cylinders

On the surface, it appeared Shift4 had a pretty good first quarter of 2021. Total payment volume was up 30% year over year to $8 billion, lapping the first two months of pre-pandemic 2020 when payment volume notched more than 50% growth from 2019. As a result, revenue (less card-network transaction fees) was up 23% to $97.5 million.

But here's the rub: Though Shift4 is back in growth mode, many of its customers in the restaurant and hospitality industry aren't back to normal yet. In fact, just the opposite. During the first few months of the year, management commented that many users of its payment system were still suffering because of occupancy restrictions and were well below peak transaction levels from a couple of years ago.

One multi-location specialty retailer closed its doors, and CEO Jared Isaacman said the sudden closure affected Shift4's adjusted EBITDA by $5.2 million during the period. For the record, total adjusted EBITDA was positive $22.2 million in the first quarter.

Someone in a retail store looking at a tablet.

Image source: Getty Images.

So how is Shift4 back in growth mode? It's picking up lots of new customers in its key markets, and has begun to expand into new ones as well. Its simplified payment-acceptance solutions are resonating with restaurateurs, hotel operators, and other specialty venues (like the new concessions and retail customer Petco Field in San Diego, home of the Padres professional baseball team).

Shift4's acquisition last autumn of 3dcart (now Shift4Shop), a provider of online-store management software, is also doing well. Shift4Shop competes with offerings from the likes of Shopify (SHOP -0.74%) and (WIX 1.73%), and is more than holding its own. At the time of purchase, there were 14,000 stores using 3dcart, and Shift4 has added over 21,000 more since then.

This underscores the brewing rebound that has sent Shift4 stock higher in its first year as a publicly traded company. New customers are helping it stay in growth mode, and existing customers are only just beginning to recover from pandemic effects. Isaacson and company thus upgraded full-year 2021 guidance, calling for total payment volume of at least $44 billion (up 81% from 2020), revenue less network fees of at least $480 million (up 49%), and adjusted EBITDA of at least $165 million (up 88%).

Is it too late to buy this post-pandemic play?

As of the end of March, Shift4 had $845 million in cash and equivalents and another $16 million in investment securities, offset by total debt of $1.12 billion. It isn't the strongest balance sheet in the digital payments space, but this small company is nevertheless in good shape to continue its aggressive expansion. Free cash flow (excluding acquisitions) was still in the red during the first quarter at negative $21.8 million, but business is headed in the right direction again as the economy gradually reopens.

Shift4's current market cap is $7.8 billion, valuing the business at 16 times expected 2021 revenue (less network fees) and 47 times expected adjusted EBITDA. Cheap growth stock? Not exactly, especially not after the stock's 190% run over the last year has priced in the Shift4 business rally already. To really keep the momentum going, the company will need to prove that it can keep carving out a niche for itself in its targeted specialty-retail corner of the payments universe beyond 2021 and into 2022.  

Nevertheless, this fintech stock has proved itself resilient since the IPO last summer and has a promising growth story in the years ahead as businesses navigate a post-pandemic digital-first world. I'm personally not buying right at the moment, but shares are on my "reopening economy stocks" watch list after the first-quarter 2021 update.