We kick off the Deluxe coverage and assign a fair value to the company at $ 55. We see significant growth potential for Deluxe’s business as the company continues to help corporate clients improve payment discipline, streamline operational processes and grow business volumes. First American’s recent acquisition of online and mobile payments significantly improves the Deluxe platform, which combines high cash flow (checks, promotions) with strong revenue growth (cloud services, payments).
We expect that the rapidly growing business profile of Deluxe, coupled with the development of payment systems and cloud solutions, will not go unnoticed by investors, therefore, the company will soon be on the radar of the investment community, which will support both multipliers and capitalization. By comparison, payment and cloud companies typically trade at 15-20x and 20-40x EV / EBITDA, respectively, while advertising solutions companies trade in the 5-10x range. We estimate at $ 55 per share for a conservative EV / EBITDA of 7.3x for 2022, clearly indicating that the Deluxe is undervalued.
Deluxe Corporation began providing payment solutions over 105 years ago. The company has evolved from a check printing company to a diversified business technology platform and services provider across four primary business segments: Payments; Cloud Solutions; Promotional Solutions; and Check. Deluxe processes more than $2.8 trillion in annual payment volume. The company operates primarily in the U.S. but also sells its products and services in Canada, Australia, portions of Europe, and South America. The company has over 4 million enterprise and SMB customers across myriad verticals, with an emphasis on financial institutions, health care, real estate / construction, and insurance. As of June30, 2021, Deluxe had 6,443 employees, predominantly in the US and, to a lesser extent, in Canada. Corporate Headquarters in Minneapolis, MN; Technology Innovation Center in Atlanta, GA.