WISE PLC (formerly TRANSFERWISE)

Weekly Valuation  – Valutico | 22 July 2022

Link to the detailed valuation: click here

Technology stocks have had a difficult year. The same is true for fintechs, which combine the momentum of technology start-ups with the financial services traditionally offered by conventional banks. Wise (LSE:WISE) belongs to the fintech category. The company helps people transfer money between more than 50 government-backed fiat currencies at lower rates than those charged by traditional banks. In 2021 the company facilitated $76 billion in transfers and had more than 13 million customers.

The company is listed on the London Stock Exchange, employs 3,368 people and has a market value of £4.1 billion ($4.1 billion). The company not only offers low-cost international money transfers, but also debit cards that allow people to spend abroad without fees, accept local money transfers and manage accounts in multiple currencies. Wise is valued at 124 times this year’s projected earnings.

After slowly building the company, the founders floated it in 2021 at a price of £8 per share, giving it a market value of around £8 billion. The company has been profitable for four years.

Since then, turbulent macroeconomic and geopolitical conditions have caused a general stock market decline, and Wise was not spared the pain. . Its share price has declined by 42% this year and is down 55% since its listing a year ago.

Wise’s business is, however, proving resilient in the current economic downturn. It currently accounts for only 3.5%of all cross-border remittances, leaving plenty of room for growth as people move more than $26 trillion across borders each year.

It has achieved excellent sales growth figures of >30% for the last two years, which analysts expect to continue for at least another five years or so. It is also consistently increasing its profit margins which, combined with very low gearing levels, puts it in a much stronger financial position than most of its direct competitors (the likes of MoneyGram, Paypal and Western Union).  

Valutico Valuation

Using the DCF method, we calculated a WACC of 6.3%, which resulted in a valuation of GBP5.4 billion (range of GBP4.4 – GBP7.3 billion), somewhat higher than its current market cap of GBP4.1 billion.

The market multiple approach delivers a starkly different result: a valuation range of between GBP 1.1 and 2 billion using various multiples. This could either be interpreted as the company being substantially overvalued or as evidence of the fact that the company has distinguished itself from its peers with its robust financial performance during trying times, and positive outlook. Our view is the latter and thus we have excluded the market multiple approach from our concluded valuation range. . 

In conclusion, we rate the company as slightly undervalued (Market Cap of GBP4.1 billion vs DCF range of GBP 4.4 – 7.3 billion). 

Link to the detailed valuation: click here