One of the problems with operating in a fastgrowing industry is that constant change and disruption can make it hard to remain successful. No sooner has a company developed a business model that is profitable than the technology shifts or competition pushes down prices. This causes margins or market share to tumble, since large amounts of investment are required to stay ahead of the competition.
So it’s often better to find a niche that is big enough to be worthwhile, but not so big as to attract a lot of other firms.
Financial technology company Corpay (NYSE: CPAY) has done just that. The firm specialises in corporate payments, including travel and hotel expenses as well as general vendor payments. These can be a nightmare for companies to manage, as giving too much latitude to employees can result in wasteful (or even fraudulent) spending.
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Yet on the other hand, micro-managing employees’ spending can sometimes backfire, increasing the need for outlay on administration, not to mention the risk of missing opportunities.
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Corpay is keeping it simple
Corpay has developed several solutions that allow firms to keep things as simple as possible, while still ensuring that money is spent efficiently and companies can change their payments policy quickly. These solutions include automated systems as well as pre-paid cards.
Another touted benefit of Corpay’s offering is that it can function as a one-stop shop for business payments, eliminating the need to give employees cards from separate companies to deal with different types of payments.
This ambitious strategy has been a big hit with many businesses, as shown by the fact that Corpay’s revenue has grown by an average of around 15% a year since 2010.
Even though growth has slowed a bit in recent years, Corpay still managed to increase sales by around 50% between 2019 and 2024. It expects to keep growing, helped by plans to launch a service that can make it easier for firms to handle cross-border payments in multiple countries.
Margins remain strong with a consistent operating margin of over 40% and a return on capital employed of just under 20%. With last year’s earnings of $14.2 per share projected to rise 73% over the next two years, thanks to the effect of acquisitions and strong growth in the US and Brazil, Corpay trades at a relatively modest 14 times the consensus forecast for 2026.
As well as a business that is profitable and growing, Corpay’s shares seem to have a good amount of momentum behind them: they have gone up by 40% over the past nine months. They have also outperformed the rest of the US market over the last six months and trade above both their 50-day and 200-day moving averages.
I would therefore suggest that you go long at the current price of $368 at £8 per $1. You should also put the stop loss at $245, which gives you a total downside of £984.
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