Earlier this week, Zacks Small-Cap Research issued a new report on Net Element, Inc. (NASDAQ: NETE). The report focused on the company’s recently released third quarter financial results, which, in addition to including an 11 percent year-over-year increase in net revenues, showed positive adjusted EBITDA for the second consecutive quarter. Zacks studied Net Element’s competitors and determined that the average valuation for companies operating in the payments space totaled roughly 7.5 times the enterprise value to trailing 12-month gross margin. Applying this multiple to Net Element’s trailing 12-month gross margin, Zacks forecast that NETE stock could be worth $4.18 per share if the company were profitable.
To view the full Zacks report, visit http://dtn.fm/Q3dGt
Despite GAAP losses resulting from the resolution of payments due for PayOnline, Zacks analysts remain optimistic regarding the company’s overall performance. Notably, the largest component of Net Element’s revenues, U.S. card processing services, has continued along its upward trajectory. The company recorded growth of 42.9 percent to $11.2 million through its domestic operations, with overseas business accounting for revenue declines through both mobile payments and PayOnline. Net Element didn’t provide a clear explanation for the 56 percent revenue shortfall in mobile payments, but the drop off in PayOnline revenues was directly attributable to the discontinuation of payment processing services for foreign currency dealers. Zacks notes that without these two international businesses, Net Element would be growing organically at a rate of more than 50 percent year-over-year and profitable.
Since the end of the third quarter, Net Element has made progress toward increasing its forward revenue through its PayOnline subsidiary. In October, the company announced an agreement between PayOnline and ExLine, the market leader for courier services in Kazakhstan, to enable online payment acceptance through the development of a custom payment solution. On the domestic front, Net Element recently announced that its proprietary Unified Payments gift card application for smart payment terminals is now available nationwide.
With all of these factors in mind, Zacks forecast that Net Element could grow to $55 million in revenues in 2016 through a combination of internal growth, strategic acquisitions and change in revenue recognition. The research report goes on to claim that the company’s PPS “could rise to $7.30 next year using 2016 estimated gross margin of $10.6 million and a share count of 17 million shares.”
For more information, visit www.NetElement.com
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