Why Paysign Plunged Today
Key Points
Paysign delivered over 50% growth in the first quarter, surging past estimates.
However, management guided conservatively, despite the strong quarter.
Having already rallied 35% this year, the stock sold off.
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The small-cap payment card processor Paysign (NASDAQ: PAYS) fell on Wednesday, dropping as much as 27.7%, before recovering to a 12.3% decline on the day.
Paysign reported first-quarter earnings that showed strong growth and beat Wall Street's expectations by a wide margin. But, as is often the case, management's conservative forward guidance sent the stock down after recent strong gains to start the year.
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Paysign delivers over 50% growth
In the first quarter, Paysign grew revenue 50.8% to $28.04 million, with adjusted EPS rising 80% to $0.09. Both figures beat analyst expectations by a significant margin.
Paysign's core business has been managing prepaid card programs for donors of blood and plasma. In recent years, it has expanded into card programs for the pharmaceutical industry more broadly, including clinical trials, healthcare reimbursement payments, and others. The company also has a smaller business that enables companies to supply payroll cards to employees.
In the quarter, the pharmaceutical business grew 81.9%, as the company added 45 patient affordability programs over the past year, resulting in 50% customer growth. Meanwhile, plasma donor revenue grew 24.9%, as the company added more customers, and revenue per donor center grew for the first time in a while after a down cycle.
Despite the very strong results, management only maintained its prior guidance for the year and did not raise the numbers. Next quarter's guidance projects a small dip in revenue, although that reflects the seasonality of the pharma business.
It appears that after a significant beat last quarter, investors might have hoped for a guidance raise. When it didn't happen, investors sold after a strong start to the year. Paysign had been up 35% on the year before earnings, so the "less than perfect" print caused today's pullback.
Paysign is an interesting small-cap
After today's drop, Paysign trades at roughly 23.5 times management's forward guidance, which is not expensive for a company projecting to grow earnings by nearly 100% this year.
Thus, Paysign's stock may be interesting on this pullback. However, investors should be aware that the company's plasma business can be cyclical, and small-cap stocks tend to carry higher risk and lower valuations than large-cap stocks with similar growth profiles.
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Billy Duberstein and/or his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Paysign. The Motley Fool has a disclosure policy.
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