Wise vs. Adyen: The Quality Investing Showdown at Compound & Fire
Exploring Long-Term Value in Fintech Payment Pioneers
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Hello, fellow quality investors!
Welcome to another thrilling showdown at Compound & Fire! Today, we venture into the dynamic world of fintech, pitting two global trailblazers against each other: Wise plc and Adyen.
Wise is the nimble disruptor, weaving a global tapestry of international money transfers and currency exchange with its promise of speed, affordability, and transparency, a lifeline for individuals and businesses crossing borders.
Then Adyen, the sophisticated maestro of payments, orchestrating seamless transactions online, in-store, and on mobile, empowering businesses with a secure, all-in-one platform.
Both are titans in their domains. This Quick Scan is more than a numbers game; it’s a narrative of financial resilience and strategic brilliance. Wise’s journey reflects a company with a rock-solid foundation and a passionate ownership team, while Adyen’s tale is one of robust growth and innovative prowess, though its leadership ownership teeters just below a key threshold. Good news: their founder is still their CEO.
As I unravel both stories, I’ll explore how these financial strengths and subtle challenges shape their appeal. Will Wise’s steady hand or Adyen’s bold ascent claim victory? Let’s dive into their financial odysseys and crown the ultimate winner!
Quick Scan Overview: Investment Readiness Scores
This Quick Scan assesses companies across three key areas: Company Snapshot, Financial Health & Performance, and Shareholder Value & Suitability. Each metric is weighted based on its impact on long-term value creation, contributing to the final Investment Readiness Score. A score above 80 flags the company as a candidate for in-depth quality investing analysis by Compound & Fire, shared on Substack and in my global quality investing app on Discord.
Wise plc: Quick Scan
For a better picture of the Quick Scan click here. The calculation of the IRS score is available in our Discord app
Summary and Highlights: Wise plc’s story is one of quiet confidence and global impact. I see a company with a balance sheet so healthy it stands like a fortress, free of debt burdens and unencumbered by intangible baggage. Its margins soar, a testament to its ability to turn cross-border transfers into a profitable art form, while its growth over the past decade reads like a saga of relentless expansion.
What truly sets Wise apart is the deep commitment of its ownership team, a group holding a significant stake, signaling unwavering belief in the company’s future. Even the slight uptick in stock-based compensation feels like a minor footnote in this tale of success. With an Investment Readiness Score of 93.3 (!), Wise feels like a seasoned navigator, guiding me through turbulent markets with a steady hand.
Adyen: Quick Scan
For a better picture of the Quick Scan click here. The calculation of the IRS score is available in our Discord app
Summary and Highlights: Now, I turn the page to Adyen, a rising star with a symphony of financial strength. Its balance sheet gleams with resilience, unmarred by debt and supported by impressive margins that reflect its mastery over payment processing. The company’s growth narrative is a crescendo, building steadily over years as it conquers new markets with its all-encompassing platform. Yet, a subtle discord emerges, its management ownership hovers just below 5%, a hint of caution in an otherwise harmonious performance. This minor flaw doesn’t overshadow its brilliance. With an Investment Readiness Score of 90.5, Adyen plays a bold tune, promising a future of innovation, though it’s still finding its rhythm compared to Wise.
The Big Picture: Investment Readiness Check
As I step back to view the broader canvas, the tales of Wise and Adyen weave a compelling contrast. Wise’s score of 93.3 edges out Adyen’s 90.5, painting a picture of a company with a slight upper hand. The difference lies in the intricate details, Wise’s ownership depth and efficient capital use create a narrative of stability, while Adyen’s growth momentum and lower compensation costs hint at untapped potential. It’s a close contest, but Wise’s story feels more polished, its chapters of shareholder value and resilience giving it a narrative edge.
What’s the Verdict?
After this gripping financial duel, I declare Wise plc the victor of this Quick Scan, its Investment Readiness Score of 93.3 outshining Adyen’s 90.5. Wise’s tale of a robust balance sheet, soaring margins, and dedicated ownership weaves a fabric of long-term value, with the slight compensation challenge fading into the background. Adyen, with its strong growth and innovative spirit, delivers a captivating performance, but its lower ownership thread leaves it just short of the crown, but with a score above 80 Adyen will also be placed on my watchlist. Wise, however, is the first one beckoning for a deeper exploration when time allows. The Discord Community will ultimately guide the priority of these candidates, but Wise’s stability and promise shine brightly.
Winner: Wise plc.
But is the market telling a different story? Let’s explore.
Market Reality Check: FCF Yield
Let’s add a financial subplot with the Free Cash Flow (FCF) yield. Wise’s yield of 40.3% which is shown in Fiscal.ai can’t be correct, so I won’t show the graph here and calculate it myself: 615M / 11,290M = 5.4%. Against the 10-year UK bond yield of 4.0%, this suggests the market might be undervaluing Wise. Could this be a hidden treasure, or a signal of unseen risks? It’s a mystery I’m eager to unravel with a deeper dive.
Adyen’s FCF yield of 3.4%, is a bit lower. Compared with a 4.0% bond yield it slightly lower. It’s a balanced note, but not the standout performance Wise delivers.
Analysis: Wise’s higher 5.4% FCF yield paints it as the total winner: a cash-rich protagonist, its efficiency and growth driving an undervaluation narrative. Adyen’s 3.38% yield, while solid, aligns with a more conventional valuation, reflecting its steady rise. The bond yields frame Wise as a potential interesting investment and Adyen as fairly priced.
Which of the two European based companies aligns with your strategy? How do you look at competition within fintech, will this give pressure on future margins? Share your thoughts in the comments below or join the debate on my Global Quality Investing Discord.
Join the Quality Edge!
Stay tuned for adetailed report on Substack and my Global Quality Investing Discord. The fintech space offers rich opportunities, and Wise stands out as a leader worth watching. Until next time, keep compounding!
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Disclaimer
The information in this article is provided for informational and educational purposes only.
The information is not intended to be and does not constitute financial advice or any other advice, is general in nature, and is not specific to you. Before using this article’s information to make an investment decision, you should seek the advice of a qualified and registered securities professional and undertake your own due diligence.
None of the information in this article is intended as investment advice, as an offer or solicitation of an offer to buy or sell, or as a recommendation, endorsement, or sponsorship of any security, company, or fund. The author is not responsible for any investment decision made by you. You are responsible for your own investment research and investment decisions.
In Wise case the customer deposits distort the OCF and therefore FCF.