Why I think under-loved PayPoint is fighting fit for the future

first_img “This Stock Could Be Like Buying Amazon in 1997” Enter Your Email Address Image source: Getty Images I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Tej Kohli | Wednesday, 3rd February, 2021 | More on: PAY Simply click below to discover how you can take advantage of this. Why I think under-loved PayPoint is fighting fit for the futurecenter_img Our 6 ‘Best Buys Now’ Shares Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Tej Kohli does not currently own PayPoint shares. The Motley Fool UK has recommended PayPoint. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! PayPoint (LSE:PAY) became an under-loved stock at the start of the coronavirus pandemic in early 2020, and its share price has struggled to recover since. Since 2016 it consistently traded at prices between 800p and 1,200p before falling off a cliff in early 2020 to reach an all-time low of 389p.  Today the price is sitting at around 650p awaiting the end of UK lockdowns.PayPoint is best known as the company behind the in-store payment services found in thousands of UK locations including convenience stores, supermarkets and petrol stations.  As the majority of these locations have been closed for months, the company’s short-term prospects have looked rather bleak throughout 2020.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…But I believe PayPoint is an exciting company that was in a very good position before Covid-19, and its long-term prospects remain excellent.  PayPoint is also amongst a unique cohort of companies that has had the same CEO in place for over two decades – which is always a good sign of underlying stability.If we remove coronavirus from the analysis, ‘underlying stability’ is what defines PayPoint.  With an astonishing operating margin of 47.2%, in 2020 the company delivered £56.8m of profit before tax from a revenue of £213.3m, with net debt of just £12m.  Yet this was not exceptional – similar results were consistently delivered in 2018 and 2019, too.A common misconception is that PayPoint is merely a provider and operator of ATMs.  This would represent a risk in a post-coronavirus cashless society.  But its network of 3,620 ATMs is just one of multiple highly diversified revenue streams.  PayPoint also delivers an omnichannel digital payments offering, which includes providing contactless and chip and pin to 9,435 retailers.  The company also operates a highly regarded parcel ‘pick up and drop off’ network across more than 8,000 sites, which processed 24.5m parcels in 2020.PayPoint’s position working with over 46,000 retailers across the UK (and Romania) is therefore highly entrenched.  Its network has more branches than all UK banks, supermarkets and Post Offices put together.  98.3% of the urban population live within one mile of a PayPoint retail partner.  And the company is empowering its partners to engage with a portfolio of its services far beyond payments.  This entrenched position creates a near-impenetrable barrier against any real threat of competition from the emerging cohort of tech-led companies that are focused exclusively on point-of-sale payment processing.Of course, PayPoint’s short-term prospects are inevitably highly correlated with the progress of the UK Government in combating Coronavirus and ending lockdowns.  But the company is in excellent shape and management should be commended for having paid down debt and focused on the underlying fundamentals of the business.  Given the ongoing success of the vaccine roll out in the UK, and the prospect of reaching the end of a series of lockdowns, I don’t believe there is any reason that PayPoint shares cannot breach their pre-coronavirus level of 1,000p in 2021.PayPoint shares might not arouse much excitement amongst those most used to encountering its branded ATMs inside their local store or newsagent.  But with a price-to-earnings ratio of just over x10 and the changing coronavirus outlook in the UK, I’m considering buying it now, and expect a 65% appreciation in 2021 followed by a consistent future dividend yield of at least 5%. 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