(BFM Bourse) – The specialist in payment solutions in the world of work will join the elite of the Paris Stock Exchange in a few days. This salutes a superb stock market performance fueled by dynamic growth and a successful diversification strategy.
Edenred will join the CAC 40 on June 19, a little over three years after its former parent company left it. Because the stock market history of this company known for the Ticket Restaurant brand began with Accor.
Ticket Restaurant had been a brand of the hotel group since 1983, then becoming Accor Services in 1998. In 2010, Accor decided to split its activities, which resulted in the IPO of Accor Services, then renamed Edenred. For the record, the name Edenred refers to “Eden”, in reference to the business project (“Enterprising Differently Together) and “Red”, which in addition to red in English, means “network” in Spanish.
Accor therefore chose to refocus on the hotel business and let Edenred fly on its own.
“Given the rise in price and activity since then, they probably had to regret at least a little,” recently judged a financial analyst.
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An impressive stock market journey
Because Edenred is a good stock market story: the company has posted a 19% increase in its share since the start of the year, and nearly 150% for five years. Its market capitalization, i.e. the value of all of its shares, stands at 15 billion euros, or nearly twice that of Accor (8.5 billion).
This stock market performance has rewarded good strategic orientations and robust growth. To give an idea, the company posted revenues up 21.2% last year on a like-for-like basis, an increase worthy of a luxury group. But perhaps another example gives a better idea of the vigor of its activity: in recent years, Edenred has only experienced one and only one quarter of falling revenues, the second of 2020. , in the midst of a pandemic. From the following quarter, the group returned to growth, taking analysts by surprise.
Several engines have enabled Edenred to go from a turnover of 965 million euros in 2010 to more than 2 billion last year. And all with significant profitability (the operating margin was just under 34% in 2022).
Successful diversification
Apart from its Ticket Restaurant brand, Edenred specializes in employee benefits, which also include gift tickets but also other offers such as carpooling solutions. From 2014, the group diversified into mobility solutions, which now include fuel cards, toll payment solutions and fleet management. In 2015, the current CEO of the group, Bertrand Dumazy, took over the helm of the company. At the beginning of 2019, the company gained a foothold in business-to-business payment solutions in the United States with the acquisition of the American CSI for 600 million dollars.
This market is booming, as a still very large proportion of payments between American companies are made by check. This has also posed problems during the pandemic.
But in addition to this relatively recent business, all of Edenred’s activities operate in under-penetrated markets, which offers an extremely significant source of growth for the group. For example, only 25% of employees today benefit from restaurant vouchers in France, with an even lower proportion in SMEs, one of the group’s major areas of conquest.
This diversification means that today the Ticket Restaurant brand only accounts for 44% of its total income.
The group’s capacity for innovation is also highlighted by analysts as a competitive advantage over its rivals. The Ticket Restaurant card, replacing the good old paper ticket, was launched in 2014 by the company, by way of illustration. More broadly, the company defines itself as a technological platform connecting 52 million users and 950,000 corporate clients to 2 million merchants.
A safe haven against inflation
Edenred also benefited from its status as a safe haven against inflation, which has a positive impact on its activity, at various levels. Part of its fuel card division was buoyed last year by rising prices at the pump, particularly in Brazil. Above all, with soaring inflation, governments are raising the amounts of the regulatory ceilings for the various tax benefits enjoyed by the company’s products. Consequently, Edenred’s customers are encouraged to increase the value of these benefits granted to employees. All the more so in this context of rising prices, which pushes to increase the value of these same benefits to employees, to grant them purchasing power in other forms than wages. This favorable wind has not finished carrying the group. The group’s financial director, Julien Tanguy, explained in April that it took about two years for this beneficial effect to reach its full potential.
“Edenred is a very specific group that combines a FinTech profile, a growth profile, a social/ESG profile [environnement, social, gouvernance, les critères extra-financier, NDLR]and an opportunity to reduce costs for some of its customers”, summarized Deutsche Bank in April.
“The company is also sensitive to various factors, such as digitalisation, which should enable the group to accelerate its growth, innovation, which is part of the company’s DNA, and inflation, which offers Edenred a solid growth driver thanks to the increase in face value [des titres, NDLR]oil price […] and the sensitivity to interest rates which should contribute to the improvement of the growth rate as well as to a higher level of profitability”, developed the German bank.
Note that the company recently announced the largest acquisition in its history in value, with the British Reward Gateway, for 1.15 billion pounds sterling (1.3 billion euros). An operation that will enable the company to generate cost and revenue synergies of more than 60 million euros in total and to expand its markets to well-being at work or social animation services, offered by this target.
Edenred’s fine stock market history could well continue. Theoretically, a company entering the CAC 40 benefits from a flow of investors who buy the stock to replicate the index in their index funds. And analysts are optimistic. Deutsche Bank has a price target of 67 euros, Credit Suisse of 65 euros and Stifel of 68 euros. This gives a potential of between 7% and 11.5% compared to the current level of the action (a little less than 61 euros at the close of Thursday). And according to a consensus of the investing.com site, 11 of the 14 analysts covering the file recommend buying the stock.
>> Bertrand Dumazy, CEO of Edenred will be the guest of BFM Business this Friday at 7:20 a.m.
Julien Marion – ©2023 BFM Bourse
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