Rimini Street, Inc. (RMNI) in Las Vegas provides enterprise software products, services, and support for various industries. In addition, the company offers software support services for Oracle and SAP enterprise software products. In comparison, Fiserv, Inc. (FISV) in Brookfield, Wisc., provides payment and financial services technology worldwide. The company’s segments include Acceptance, Fintech, and Payments, and it serves businesses, banks, credit unions, other financial institutions, merchants, and corporate clients.
Even though concerns related to data security and cyberattacks have marred the fintech industry’s growth, the industry still holds immense upside potential amid the current digital era because of rapid technological advances in the internet of things (IoT) and artificial intelligence (AI), among others. According to an Expresswire report, the fintech market is expected to grow at an 8.6% CAGR over the next three years. As such, both RMNI and FISV should benefit.
RMNI has gained 60.2% over the past year, while FISV has returned 9.4%. Also, RMNI’s 163.6% gains over the past nine months are significantly higher than FISV’s 10.5% returns. And in terms of their past month’s performance, RMNI is the clear winner with 32.6% gains versus FISV’s 4.1%.
But which of these two stocks is a better buy now? Let’s find out.
Latest Developments
This month, RMNI established a $90 million five-year senior secured credit facility. Seth A. Ravin, the company’s CEO, said, “The full redemption of the remaining Series A Preferred stock using this new $90 million commercial bank financing achieves our long-stated goals of obtaining competitive market rates for capital, reducing financing costs and dividend obligations and providing operational flexibility that supports accelerating growth and capital return options.”
On July 20, 2021, FISV announced its integration of a cutting-edge fraud prevention solution into its e-commerce payment gateway to reduce fraud-related chargeback risk for Mexican e-commerce. With this, FISV clients will reduce e-commerce transaction chargeback risk by using the Vesta fraud prevention platform.
Recent Financial Results
RMNI’s revenue increased 12.6% year-over-year to $87.90 million for its fiscal first quarter ended March 31, 2021. The company’s adjusted EBITDA grew 16.3% year-over-year to $10.70 million, while its non-GAAP net income increased 10.4% year-over-year to $8.5 million. Also, its total assets came in at $311.57 million, up 11.3% year-over-year.
FISV’s adjusted revenue increased 2% year-over-year to $3.56 billion for its fiscal first quarter, ended March 31, 2021. The company’s adjusted operating income increased 15.3% year-over-year to $1.12 billion, while its adjusted net income increased 16.5% to $797 million. Its total assets came in at $74.84 billion, versus $74.62 billion in the previous quarter.
Past and Expected Financial Performance
RMNI’s revenue and EBIT grew at 14.6% and 9.5% CAGRs, respectively, over the past three years. Analysts expect RMNI’s revenue to increase 14.5% in its fiscal year 2021 and 16.9% in fiscal 2022. The company’s EPS is expected to grow 300% for the quarter ending September 30, 2021, and 316.7% in fiscal 2021. Also, its EPS is expected to grow at a 15% per annum rate over the next five years.
In comparison, FISV’s revenue and EBIT grew at CAGRs of 37.2% and 7.7%, respectively, over the past three years. The company’s revenue is expected to increase 9.2% in its fiscal year 2021 and 7.5% in fiscal 2022. Its EPS is expected to grow 20% for the quarter ending September 30, 2021, and 23.3% in fiscal 2021. FISV’s EPS is expected to grow at an 18.3% rate per annum over the next five years.
Profitability
FISV’s $14.84 billion trailing-12-month revenue is higher than RMNI’s $336.64 million. FISV is also more profitable, with 12.89% and 5.86% EBIT and net income margins, respectively, compared to RMNI’s 9.88% and 2.04%.
However, RMNI’s 8.11% ROA is higher than FISV’s 1.62%.
Valuation
In terms of forward EV/Sales, FISV is currently trading at 6.03x, which is 215.7% higher than RMNI’s 1.91x. Moreover, FISV’s 15.10x forward EV/EBITDA is higher than RMNI’s 14.73x.
So, RMNI is the more affordable stock.
POWR Ratings
RMNI has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. In comparison, FISV has an overall C rating, which translates to Neutral. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Both RMNI and FISV have a B grade for Momentum. This is justified given RMNI’s 12.1% gains over the past six months and 32.6% gains over the past month, and FISV’s 4.2% returns over the past six months and 4.1% gains over the past month.
RMNI has a B grade for Growth, which is consistent with analysts’ expectations that its revenue and EPS will increase significantly in the coming months. FISV, in contrast, has a C Growth grade, which is consistent with analysts’ expectations that its revenue and EPS will increase, but at a modest rate.
RMNI has an A grade for Quality. This is justified given RMNI's 1.31% trailing-12-month asset turnover ratio, which is 105.7% higher than the 0.64% industry average. FISV, in comparison, has a C Quality grade, which is consistent with its 0.20% trailing-12-month asset turnover ratio, which is 68.5% lower than the 0.64% industry average. Of the 59 stocks in the B-rated Software - Business industry, RMNI is ranked #8. However, FISV is ranked #64 of 102 stocks in the D-rated Financial Services (Enterprise) industry.
Beyond what we’ve stated above, we have also rated both the stocks for Stability, Sentiment, and Value. Click here to view all the RMNI ratings. Also, get all the FISV ratings here.
Click here to check out our Software Industry Report for 2021
The Winner
The fintech industry is expected to gain exponentially in the coming quarters owing to the rapid adoption of advanced technological solutions in the financial sector. While both RMNI and FISV are expected to gain over the long term, we think it is better to bet on RMNI now because of its relatively lower valuation and better growth prospects.
Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the top-rated stocks in the Software - Business industry here. Also, click here to access all the top-rated stocks in the Financial Services (Enterprise) industry.
RMNI shares were trading at $8.34 per share on Monday afternoon, down $0.07 (-0.83%). Year-to-date, RMNI has gained 88.26%, versus a 18.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Nimesh Jaiswal
Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.
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