Paymentus (PAY)

Digital payment platform Paymentus (NYSE:PAY) reported Q3 CY2025 results exceeding the market’s revenue expectations, with sales up 34.2% year on year to $310.7 million. On top of that, next quarter’s revenue guidance ($309.5 million at the midpoint) was surprisingly good and 5.8% above what analysts were expecting. Its non-GAAP profit of $0.17 per share was 14.6% above analysts’ consensus estimates.

Company Overview

Founded in 2004 to simplify the complex world of bill payments, Paymentus (NYSE:PAY) provides a cloud-based platform that helps utilities, municipalities, and service providers automate billing and payment processes.

Diversified financial services encompass specialized offerings outside traditional categories. These firms benefit from identifying niche market opportunities, developing tailored financial products, and often facing less direct competition. Challenges include scale limitations, regulatory classification uncertainties, and the need to continuously innovate to maintain market differentiation against larger competitors expanding their offerings.

Paymentus competes with other payment technology providers including ACI Worldwide (NASDAQ:ACIW), Fiserv (NASDAQ:FI), Jack Henry & Associates (NASDAQ:JKHY), and privately-held companies like Invoice Cloud and Aliaswire in the bill payment space.

A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Luckily, Paymentus’s revenue grew at an incredible 31.6% compounded annual growth rate over the last five years. Its growth surpassed the average financials company and shows its offerings resonate with customers, a great starting point for our analysis.

We at StockStory place the most emphasis on long-term growth, but within financials, a half-decade historical view may miss recent interest rate changes, market returns, and industry trends. Paymentus’s annualized revenue growth of 39% over the last two years is above its five-year trend, suggesting its demand was strong and recently accelerated.

This quarter, Paymentus reported wonderful year-on-year revenue growth of 34.2%, and its $310.7 million of revenue exceeded Wall Street’s estimates by 10.7%. Company management is currently guiding for a 20% year-on-year increase in sales next quarter.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Diversified Financial Services companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last four years, Paymentus’s pre-tax profit margin has fallen by 2.6 percentage points, going from 4.1% to 6.7%. It has also expanded by 3.8 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

Paymentus’s pre-tax profit margin came in at 7.3% this quarter. This result was 1 percentage points better than the same quarter last year.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Paymentus’s full-year EPS grew at an astounding 83.5% compounded annual growth rate over the last four years, better than the broader financials sector.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

Paymentus’s EPS grew at an astounding 91% compounded annual growth rate over the last two years, higher than its 39% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into the nuances of Paymentus’s earnings can give us a better understanding of its performance. Paymentus’s pre-tax profit margin has expanded over the last two years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q3, Paymentus reported adjusted EPS of $0.17, up from $0.15 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Paymentus’s full-year EPS of $0.62 to grow 11.7%.

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for banks. Over a long period, banks with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Paymentus has averaged an ROE of 5.9%, uninspiring for a company operating in a sector where the average shakes out around 10%. We’re optimistic Paymentus can turn the ship around given its success in other measures of financial health.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Paymentus currently has $7.36 million of debt and $537.4 million of shareholder's equity on its balance sheet, and over the past four quarters, has averaged a debt-to-equity ratio of 0×. We think this is safe and raises no red flags. In general, we’re comfortable with any ratio below 3.5× for a financials business.

We were impressed by how significantly Paymentus blew past analysts’ revenue expectations this quarter. We were also glad its full-year revenue guidance exceeded Wall Street’s estimates. Zooming out, we think this quarter featured some important positives. The stock traded up 11.3% to $31.79 immediately after reporting.

Updated: December 4, 2025 at 11:39 PM EST

The latest quarterly earnings matters, sure, but we actually think longer-term fundamentals and valuation matter more. Investors should consider all these pieces before deciding whether or not to invest in Paymentus.

There are multiple reasons why we think Paymentus is an elite financials company. First of all, the company’s revenue growth was exceptional over the last five years. And while its mediocre ROE lags the market and is a headwind for its stock price, its astounding EPS growth over the last four years shows its profits are trickling down to shareholders. Additionally, Paymentus’s expanding pre-tax profit margin shows the business has become more efficient.

Paymentus’s P/E ratio based on the next 12 months is 47x. A lot of good news is certainly baked in given its premium multiple, but we’ll happily own what we believe is one of the best businesses in our coverage. It’s often wise to hold investments like this for at least three to five years, as the power of long-term compounding negates short-term price swings that can accompany high valuations.

Wall Street analysts have a consensus one-year price target of $38.83 on the company (compared to the current share price of $36.67).