As a frequent global traveler, I use WISE PLC every day. I am always on the lookout for the best ways to travel, spend, and convert various currencies to ensure that I get the best rates. Creating Wealth is not just about investing intelligently, it is also about spending intelligently and maximizing healthy financial habits. This can compound wealth just as much as picking the next big stock.

As a side note, check out my Wealth Building Principles to understand a little more about how I view money.

I recently discovered the Wise card, and it has significantly improved my travel experiences. I use Wise for various purposes, such as transferring funds abroad to different accounts, converting and paying bills, covering business expenses, or withdrawing cash, and it has rarely let me down. I’ve even withdrew cash from an old ATM in a remote location and still had no issues.

I have also used it to pay for tuk-tuk rides in remote areas and have always been able to operate smoothly. The fees are very competitive, their customer service is excellent, and I am continually expanding my business accounts and using Wise more frequently.

Despite sounding like a paid advertisement, I assure you that it is not. I believe in giving credit where it is due, and Wise has truly been innovative in a very traditional forex exchange and transaction industry.

❓ The first Question Intelligent Investors ask…

Like all intelligent investors, when we come across something we like and that is popular, the first thing to do is check whether it is a public or private company.

It turns out that Wise is a publicly listed mid-cap company on the London Stock Exchange. This sparked my curiosity to investigate further and see if the company is as well-managed and promising as its rapidly growing popular brand.

This is what investing is all about – spotting trends, identifying what consumers are using, and examining well-managed brands and operations to determine if we can be a part of it, if it all adds up, of course. I don’t subscribe to the idea that you should invest in what you own and use; sometimes those companies are great brands but not necessarily good stocks.

We must always be on the lookout for opportunities and keep our ears to the ground. I’ve discovered fantastic opportunities simply by applying the same concepts as Peter Lynch, being aware of our surroundings, and also using the old Scuttlebutt techniques.

I began examining the financial statements to assess how well WISE is managed and to look at the numbers. Let’s take a closer look.

💳 A little about WISE PLC.

Over 12.8 million active personal and business customers now use Wise to move more than £25 billion across the world every single quarter…no small operation.

Wise PLC, formerly known as TransferWise, is a financial technology company that focuses on global money transfers. It is headquartered in London and was founded by Kristo Käärmann and Taavet Hinrikus in January 2011.

Wise plc offers cross-border money transfer services to both personal and business customers in the United Kingdom, Europe, the Asia-Pacific region, North America, and internationally.

The company’s transfer infrastructure includes Wise Account for international money management. Wise Business for international businesses. Finally, Wise Platform, which enables businesses and banks to provide international payment services to their own customers.

Wise also offers a Visa card that enables users to spend in the local currency wherever they are.

On July 7, 2021, Wise went public with a direct listing on the London Stock Exchange and was valued at $11 billion. However, its market cap has since dropped to around $9.3 billion. The company’s stock has experienced a decline of approximately 25% since its initial public offering and has not shown significant growth.

Its 52-week range is within the typical range for a midcap, with a 52-week high of around £9.98 and a low of £5.58.

As of September 4, 2024, the share price trades at around £6.99. The performance of the company in terms of margins, efficiency, and financial health is intriguing, considering that one would expect such impressive figures to result in substantial growth in market cap.

This prompted me to conduct further research.

🪭I am a fan, but how do the numbers stack up?

Wise Plc has impressive financial metrics. Its Last Twelve Months (LTM) Gross Margin is 78.2%, and its LTM EBIT margin is 34.1%, indicating strong efficiency. The Return on Invested Capital is around 40%, and the Return on Equity is 45%. The price-to-earnings ratio is approximately 20.72x, which is not excessively high.

The company’s net debt position is (£836 million), bringing the entire Enterprise Value to approximately £6.3 billion or USD 8.2 billion. Notably, the company has no long-term debt and only around $220 million in short-term borrowings. With about a billion US dollars in cash, Wise appears to be financially healthy from a balance sheet perspective. Despite this, share dilution has increased shares outstanding to over 1 billion.

Wise’s revenue has been steadily increasing, from $421 million at its IPO to over $1.052 billion in the Last Twelve Months (LTM). The company also demonstrates healthy margins and growing net income on the income statement.

💰 It is spitting out some impressive free cash flow…

On the cash flow statement, Free Cash Flow has been steadily growing. In 2021, it was $2.07 billion, increasing to $3.1 billion in 2022, and further to $3.9 billion in 2023. The company is generating significant Free Cash Flow, with Free Cash Flow margins averaging 450% over the past 3 years.

Net Income is translating into strong cash flow from operations, with significant changes in Net Operating Assets impacting working capital. Notably, a substantial investment into marketable and equity securities was made in the 2023 fiscal year, amounting to $2.57 billion. The company has also paid down approximately $800 million in debt over the last few years, demonstrating robust debt reduction and contributing to a healthy balance sheet. They have also stepped up share repurchases forking out $68 million this year in buybacks.

These metrics indicate a healthy, high-margin business generating substantial cash flow and maintaining a stable balance sheet. However, the share price does not seem to reflect these strong fundamentals.

📄 The 2024 Annual Report results…

The 2024 Annual Report was released in June, and it looked impressive. The company highlights the amazing financial year they had with the following.

Investing in growth over the last 3 years has paid off and WISE plc has been able to grow active customers by a 29% CAGR, cross-border volumes by 30% CAGR to £118.5 billion, and customer balances rose by a 53% CAGR to £13.3 billion.

This is a rapidly growing Fintech company looking to disrupt an entire industry with it’s unique infrastructure and incredibly well run operation.

🤔 What do I think so far?

Wise is still relatively new in the public equities game, and the financials only reflect the last few years since its IPO in 2021. The company is in a phase of expansion and reinvesting in growth. I believe it is still early days for Wise plc and the future looks very promising for the company.

The report indicates what I suspect is a scaling start-up heavily reinvesting in growth and innovation and boasting incredible growth in customers and adoption.

The competitive landscape will continue to pose a threat. There is no shortage of fintech companies, forex conversion businesses, and other companies that are penetrating this lucrative market.

In my opinion, Wise has created an incredible brand with a unique offering and great service. Will this be enough to keep off the competition? Time will tell. Having used a variety of the competitors, I do believe it is way ahead of the pack in what it offers.

Forward-looking estimates look exceptional. The company has revenue growth forecasts of around 12% CAGR, and if margins remain similar, this should grow that Free Cash Flow every year. When I look at the financials, the mixed bag of opinions, Wise fits the start-up label.

Over the long term, companies managed this well, throwing off these numbers usually turns out positive. If they can continue to accelerate buybacks, using that free cash flow to reinvest in growing their reach and bringing in new customers, then the share price is likely to follow.

The business is very well capitalised as well and, in this sector, that makes a huge difference. With the founders committed to the long-term success of the business, it is worth keeping an eye on Wise Plc.

👁️ Keeping an eye on it.

This is just a short wrap-up of Wise Plc. I don’t own shares as of now; I am currently looking in depth at the business, the model, the competitive landscape, and how they will be able to compound and deliver a share price re-rate in the years to come.

If WISE can continue to deliver, I’d say it will fit into being a great quality compounding stock. 💎

This is by no means a form of analysis, just a look at a brand that I like to use and an initial peak beneath the hood to see what is going on…I like what I see.