Wirecard payment service, a provider of software for online payments from Asheim (just outside of Munich), has taken over Deutsche Bank in market capitalization, even though Wirecard generates just 5% as much in revenue as the largest German Bank (figures reported by Bloomberg).
Wirecard was founded in 1999. Its products are online payment solutions with well-developed fraud protection. Wirecard has been trading on the Frankfurt Stock Exchange since 2006. Throughout its history its shares had a positive trend, which turned particularly prominent in 2017. Since then, for a year and a half, the share price of the company has grown 4-fold, and during the first half of 2018 – by 84%. Now the company is even being considered for the German National Stock Index DAX (possibly replacing another large bank – Commerzbank).
At the moment Wirecard’s capitalization is 21 Billion euros while its annual revenue is 1.5 Billion euros. The P/E ratio (the price/earnings ratio) is 74, which is a rather high figure. But such valuations are not uncommon for growth companies. For instance, Netflix's P/E ratio is 156 now, but even this figure does not deter major investors.
Wirecard’s growth is not a one off either. It mirrors the success of Auden, the Pan-European service, that debuted in June and since then its shares have doubled in value. Payment companies are very popular among investors because they profit from the global growth of E-commerce and mobile payments without investing into the process themselves.
Experts expect Wirecard's revenue to reach 2.5 Billion euros by the end of 2019. Investors are betting on the company’s growth meaning its share price may rise based on these expectations, potentially without taking into consideration earnings and profit growth. It became especially popular after publications about its success and performance relative to that of Deutsche Bank.
What does it mean for investors?
Whatever decision you make regarding Wirecard stock, one should watch the company carefully - even the experts’ favorites may hold a surprise. Wirecard works in a hot segment, but it doesn’t guarantee full protection from market fluctuations.
Wirecard’s stocks are available via your EXANTE trading terminal. Just go to Instruments > Stocks and ETFs > XETRA > WDI: Wirecard.
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