Why Nuvei (TSX:NVEI) Is Inflation-Protected

Inflation could cause a spike in Nuvei (TSX:NVEI) stock as transaction value rises.

| More on:

Inflation is on everyone’s mind now. Canada reported 3.4% inflation last month, while the U.S. has reported 5% in its latest figures. Once the economy reopens and consumer spending surges back, Canada’s inflation rate could surpass the U.S. swiftly. 

While central bankers are not worried about this, consumers and investors should certainly pay attention. If inflation escapes government control, we could face much higher prices and wealth erosion in the years ahead. One way to protect yourself is to invest in stocks of companies that can pass the inflation onto their customers. 

Payment processor Nuvei (TSX:NVEI) is a great example. The stock has more than doubled in value since going public. However, much of that growth was driven by e-commerce spending during the pandemic. Now, the stock could be an effective safe haven for investors concerned about inflation. 

Processing payments

Payment processors extract a fee from every transaction that passes through their network. This means that if the merchants on their network raise their prices, transaction volumes rise, and Nuvei’s top line expands. In other words, the company transmits inflation, which makes it an ideal hedge. 

Besides this aspect, Nuvei stock also has greater potential for growth.

As a non-bank payment processor, Nuvei gives investors exposure to the burgeoning payments, e-commerce, and cryptocurrency space.

As online shopping continues to see enormous growth, the net effect has been an 80% increase in the total transaction volume that Nuvei handles on its payment platform. In addition to offering a payment platform to the e-commerce sector, its payment technology platform is also attracting transaction volume in the gambling and sports betting industries.

Revenue growth

Nuvei is currently permitted to offer payments service to all regulated sports betting operators. The company makes money by charging transaction fees on providing a payment gateway. In the first-quarter, the company pulled an 80% increase in revenues that totaled $150 million. Given the strong demand for its payment service, the company expects revenue of between $610 million and $640 million in 2021.

Nuvei has also continued to pursue inorganic growth through strategic acquisitions. In the last six months, it has completed four acquisitions. The latest addition, crypto payment firm Simplex, is poised to offer significant growth opportunities in the burgeoning cryptocurrency sector. An integrated payment platform including multiple currencies and cryptocurrencies and in more jurisdictions will be the catalyst driving Nuvei bottom line to new heights.

After a recent pullback, Nuvei is still trading at a premium with a price-to-sales multiple of 26 and a price-to-book multiple of 7.83. However, a premium valuation is expected of a high-growth stock with tremendous potential.

Bottom line

Inflation has a devastating impact on the economy and the stock market. Investors could lose purchasing power without realizing it. However, companies like Nuvei transmit inflation rather than suffer from it. This makes it a potential safe haven during an inflationary cycle. Keep this on your radar as we see how inflation shapes up in the year ahead. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. 

More on Tech Stocks

investment research
Tech Stocks

Is OpenText Stock a Buy, Sell, or Hold for 2025?

Is OpenText stock poised for a 2025 comeback? AI ambitions, a 3.8% yield, and cash flow power make it a…

Read more »

The virtual button with the letters AI in a circle hovering above a keyboard, about to be clicked by a cursor.
Tech Stocks

Emerging Canadian AI Companies With Big Potential

These tech stocks are paving the way to an AI-filled future, but still offer enough growth ahead for a strong…

Read more »

Young Boy with Jet Pack Dreams of Flying
Tech Stocks

Is Constellation Software Stock a Buy, Sell, or Hold for 2025?

CSU stock has long been a strong option for high growth, high value stocks. But are there now too many…

Read more »

An investor uses a tablet
Tech Stocks

Canadian Tech Stocks to Buy Now for Future Gains

Not all tech stocks are created equal. In fact, these three are valuable options every investor should consider.

Read more »

dividend growth for passive income
Tech Stocks

2 Rapidly Growing Canadian Tech Stocks With Lots More Potential

Celestica (TSX:CLS) and Constellation Software (TSX:CSU) are Canadian tech darlings worth watching in the new year.

Read more »

BCE stock
Tech Stocks

10% Yield: Is BCE Stock a Good Buy?

The yield is bigger than it's ever been in the company's history. That might not be a good thing.

Read more »

Happy shoppers look at a cellphone.
Tech Stocks

So You Own Shopify Stock: Is it Still a Good Investment?

Shopify (TSX:SHOP) stock has had a run, but there's still room to the upside.

Read more »

A person uses and AI chat bot
Tech Stocks

AI Where No One’s Looking: Seize Growth in These Canadian Stocks Before the Market Catches Up

Beyond flashy headlines about generative AI, these two Canadian AI stocks could deliver strong returns for investors who are willing…

Read more »