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Can Payment Data Systems, Inc. (NASDAQ:PYDS) Sustain This Run?

Can Payment Data Systems, Inc. (NASDAQ:PYDS) Sustain This Run?
Written by
Chris Sandburg
Published on
November 1, 2017
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Payment Data Systems, Inc. (NASDAQ:PYDS) is a real runner this week.The company kicked off the session on Monday in and around $1.40 a piece. By the close of play on Tuesday, Payment Data Systems went for $2.59, having run 85% across the session. PYDS Daily ChartThe company picked up a bit of promotional activity early week and there's a good chance that this activity is what's driving the majority of the gains but, as we've done before, we're going to ask the question – is there any run room left and, in turn, is there any value in jumping in on this morning's pullback in anticipation of a continuation of the action we are seeing?Let's take a look.So, Payment Data Systems is a payments processing company that's based out of San Antonio, Texas. The company offers various types of automated clearing house (ACH) processing; and credit, prepaid card, and debit card-based processing services and – as per the numbers just reported as part of a third-quarter transaction volume update – it's actually doing pretty well in terms of metric growth.We say this because oftentimes, when we see a stock run on some promotion, there's very little under the hood to reinforce and, in turn, offer some support to, the increased stock price.That's not really the case here.Credit cards dollars processed during the third quarter of 2017 were up 77% over the same period in 2016 and 83% over the second quarter of this year. These figures were 33% and 138% respectively for credit cards transaction count, as opposed to the raw dollar value noted above.Total dollars processed for the third quarter of 2017 came in at just shy of $705 million.For a company that's valued at just $30 million, even after the recent run, close to two-thirds of a billion dollars in transaction volume on a quarterly basis is a pretty solid achievement.The vast majority of the ramp up in transaction volume came on the back of recent acquisition, as part of which the company acquired an entity called Singular Payments LLC back at the start of September this year. The transaction cost Payment Data $1.5 million in cash and a further $3.5 million in shares (a little over 1.5 million of common stock priced at $2.31) and the increase in volume we are seeing now should really just be the start of an even larger increase as the two businesses integrate further over the coming quarters.So there's growth and there seems to be plenty going on behind the scenes that suggests we’ll see a continuation of this growth operationally – but will it translate to share price increase?Well, for that, we really need to see a catalyst. And it just so happens that we’ve got one. The company is set to put earnings for the third quarter of 2017 on or before November 15, 2017. Given the rise in transaction volume that we've seen over the last quarter or two, there's a good chance that this report will have some pretty strong numbers (we're looking specifically at top line as well as how the increase in top line has filtered through to bottom line) and – in turn – should induce a bit of upside momentum for the company heading into the close of the year.Keep in mind that there's not a lot of cash on hand here ($2.5 million on June 30, but the company used $1.5 million to fund the Singular acquisition) so there's a chance we'll see some near-term dilution. If the numbers are strong come November 15, however, any dilution should serve to induce just a correction on a longer-term up-trend as opposed to a reversal.We will be updating our subscribers as soon as we know more. For the latest updates on PYDS, sign up below!Image courtesy of Mike Mozart via FlickDisclosure: We have no position in PYDS and have not been compensated for this article.

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