Significant populations of the world live their day-to-day lives without access to traditional banking and instead rely on commercial services to pay bills, cash checks, and send funds to family members, often internationally, notes Doug Gerlach, editor of SmallCap Informer.

International Money Express (IMXI) is a leading provider of money transfer services that allow users to send funds to, from, and within the United States, Latin America, Mexico, Africa, Central and South America, and the Caribbean.

Its services include a suite of financial processing solutions and payment services; online payment options; pre-paid debit cards; and direct deposit payroll cards.

It provides services through a network of more than 100,000 payer locations in third-party owned and operated retail stores, banks, and agents, and also through its company-operated stores, website, and mobile application. Many locations also provide check-cashing services, money orders, and bill payment services for local phone, cellular, cable, electric, gas, and water companies.

Though plausibly considered a FinTech business, the physical presence offered by Intermex is key to its success with its user base. Unlike other digital payment solutions like Square/CashApp or Paypal, Intermex’s customers require the ability to convert and transfer currency and paper checks. Its key competitor in the western hemisphere is Western Union via its Vigo subsidiary.

Since 2015, revenues have grown at an annualized 23.8% rate, reaching $357.2 million in fiscal 2020. After striking out 2017 (a stub year) and 2018 (in which higher service fees held net income back), EPS achieved annualized 36.7% growth in the same timeframe.

In the company’s third quarter ended September 30, 2021, Intermex saw revenue increase 26.3% to $120.7 million, while EPS increased 16.0% to $0.29. Total transactions grew 23.4% from Q3 2020 and the company reports that it reached a record market share of 21.8% in its core markets.

Intermex’s agent base increased 13% over Q3 2020, with most agents added in California West. This agent growth helped deliver 19% increase in unique customers in the period. Guidance was raised when Q3 results were released.

For the full fiscal year 2021, management now expects revenue of $450-$455 million and net income of $44-45 million. At the low end of these ranges, year-over-year revenue growth would be 26.0% and net income growth would be 30.2%. EPS growth would then come in at $1.12 or better, representing 27% growth over FY 2020.

Intermex’s strong cash generation is allowing the company to invest more quickly in new growth products such as reloadable cards, including pre-paid debit and direct deposit payroll cards.

We maintain our expectations for Intermex to deliver future revenue growth of 14.0% a year and EPS growth of 16.0% on average through 2025. Pre-tax profit margins stood at 8.0% in 2015 and reached 13.0% in 2020. PTP margins in the first three quarters of 2020 were 13.5% or higher.

Reaching higher operating efficiency is a goal of management, and continued margin improvement should drive increased profitability. Free cash flow growth is strong, as the business throws off plenty of cash. Long-term debt is declining, and the company reports it remains in compliance with all debt covenants.

From its current P/E of 14.1, we see the company able to support a high P/E of 17.0, which would indicate a future high price of $39. On the downside, a retreat to a low P/E of 11.0 would suggest a low price of $12. The reward/risk ratio using these prices is 6.9-to-1, with an annualized 20.4% total return possible.

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