Is Shift4 Payments (FOUR) Pricing Fair After A 39.6% One-Year Share Price Slide?

• If you are wondering whether Shift4 Payments' current share price lines up with its underlying value, this article will walk through what the numbers actually say rather than relying on headlines or hype.
• The stock closed at US$63.96 recently, with a 0.7% decline over the last week, a 7.1% decline over the last month, a 2.0% gain year to date, and a 39.6% decline over the last year. These moves may have changed how the market is thinking about its potential and risks.
• Recent attention on Shift4 Payments has focused on its position in the payments sector and how investors are weighing its business model against other listed payment processors. This context helps explain why the share price has moved over different time frames, as the market reacts to sector sentiment and company specific updates rather than just broad market moves.
• Our current valuation checks give Shift4 Payments a score of 1 out of 6. We will break this down using a range of approaches and then finish by looking at a more complete way to think about what the stock might be worth.

Shift4 Payments scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Shift4 Payments Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn above the return that equity investors require, then capitalizes those excess profits into an intrinsic value per share.

For Shift4 Payments, the model starts with a Book Value of US$10.14 per share and an Average Return on Equity of 15.87%. That translates into a Stable EPS of US$3.87 per share, based on the median return on equity from the past 5 years. The estimated Cost of Equity is US$2.21 per share, so the Excess Return is US$1.66 per share, meaning the company is expected to earn more than the required return on its equity base. The Stable Book Value used in the model is US$24.38 per share, sourced from weighted future book value estimates from 3 analysts.

Putting this together, the Excess Returns model produces an intrinsic value of about US$53.16 per share. Compared with the recent share price of US$63.96, this implies the stock is around 20.3% overvalued.

Result: OVERVALUED

Our Excess Returns analysis suggests Shift4 Payments may be overvalued by 20.3%. Discover 880 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Shift4 Payments.

Approach 2: Shift4 Payments Price vs Earnings

For profitable companies, the P/E ratio is a useful way to link what you pay for each share to the earnings the business is currently generating. It helps you see how many dollars of price the market is attaching to each dollar of earnings.

What counts as a normal or fair P/E usually reflects how investors see a company’s growth potential and risk. Higher expected growth or lower perceived risk can support a higher multiple, while slower growth or higher risk tends to point to a lower one.

Shift4 Payments is trading on a P/E of 26.2x. That sits above the Diversified Financial industry average P/E of 13.99x, but below the peer group average of 59.21x. Simply Wall St’s Fair Ratio for Shift4 Payments is 24.54x. This is its own estimate of an appropriate P/E once factors like earnings growth, profit margins, industry, company size and specific risks are taken into account.

This Fair Ratio is more tailored than a simple comparison with peers or the broad industry, because it adjusts for the company’s own characteristics rather than assuming all firms deserve the same multiple. With the current P/E of 26.2x versus a Fair Ratio of 24.54x, the shares are slightly expensive on this basis.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1455 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Shift4 Payments Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. Narratives let you attach your own story about Shift4 Payments to the numbers by linking your view on its future revenue, earnings and margins to a financial forecast, a Fair Value, and then a clear comparison with today’s share price. All of this sits inside an easy tool on Simply Wall St’s Community page that updates automatically when fresh news or earnings arrive. One investor might build a bullish Shift4 Payments Narrative around catalysts like international acquisitions, value added services and sports partnerships that support a Fair Value closer to US$131.00. Another might focus on integration risks, leverage and sector uncertainty and land nearer US$88.00. By setting out these different stories side by side with their Fair Values, Narratives help you decide for yourself whether the current price looks high, low, or roughly in line with what you think the company is worth.

Do you think there's more to the story for Shift4 Payments? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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