Another quarter has come and gone, and Euronet Worldwide (NASDAQ:EEFT) continues to prosper from the basic human desire for convenience. Want to take money out of an ATM in Europe? Euronet just might get a cut. Ditto for prepaid cell phone services and an expanding array of other financial transactions.
There are still a lot of transactions left for Euronet to capture and process, and that's fueling the growth today. Revenue was up 25% in this most recent quarter, with adjusted earnings before interest, depreciation, and amortization climbing 25% and operating income growth lagging a bit (because of stock compensation expenses) at 17%.
While the company's prepaid-processing business is still the largest in terms of EBITDA and operating income, the ATM business is quickly closing the gap. ATM processing clocked in with 32% higher operating income growth this quarter as the company increased its machines under management by 23%. By comparison, the prepaid-processing business saw operating income rise 15% on an increase of better than 43% in the number of transactions processed.
Given the discrepancy between overall transaction growth and revenue/income growth this quarter, it seems fairly clear that the company is making less per transaction. And as the company continues to expand into markets like India and China, I would expect that trend to continue -- I just don't see the potential to charge as much in absolute dollars in these less affluent (per capita) economies. By the same token, Euronet operates just 50 of the roughly 90,000 ATMs in China and recently signed an agreement with ING (NYSE:ING) to add another 100 under management in India, so the growth potential is still enormous.
Euronet isn't the cheapest stock around, but then neither are its comparables. I wouldn't call eFunds (NYSE:EFD), CheckFree (NASDAQ:CKFR), or Global Payments (NYSE:GPN) cheap, but investors seem willing to pay for these potentially cash-rich business models. I'm keeping Euronet high up on my swoon list -- as in a company I'd really get interested in if the stock would see a 15% or so drop. Perhaps I'm overly captivated with the potential in Asia, but I love these high-volume, convenience-oriented business models.
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Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares).
