EVTC

EVERTEC is a high-quality, capital-light payments and transaction-processing franchise (merchant acquiring, the ATH debit network, core-bank processing) spanning 26 countries, and the numbers show a business compounding nicely: FY2025 revenue grew 10.2% to $932M — capping a clean multi-year ramp from $590M in 2021 — while diluted EPS jumped 27.2% to $2.20 and net income rose 25.7% to $142M. Profitability is genuinely good: a 20.0% operating margin, 15.2% net margin, and a 22.8% return on equity, with capex of just $23.3M against $227M of operating cash flow underscoring management's 'recurring revenue, scalability, moderate capex' description. The stock trades at 12.5x earnings and 1.8x sales — undemanding for a recurring-revenue fintech growing double digits, especially with ~$204M of free cash flow against a $1.70B market cap (roughly a 12% FCF yield).

The valuation gap exists for identifiable reasons, and they are real but not disqualifying. Customer concentration is the headline risk the 10-K flags first: ~29% of FY2025 revenue came from Banco Popular, and the most significant contract — the A&R MSA — expires in 2028, with the filing explicitly warning Popular 'may require significant concessions… with respect to pricing, services, and other key terms.' That renewal, plus heavy exposure to Puerto Rico and Latin American macro/FX, is what keeps the multiple compressed. Leverage is also elevated at 2.46x liabilities/equity with $1.05B of long-term debt, though $306M of cash and $186M of operating income make it serviceable, and equity grew 31.6% as retained earnings build.