Euronet Worldwide Shares Popped: What You Need to Know


Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of electronic payment specialist Euronet Worldwide (NAS: EEFT) popped 10% higher on Friday ... despite there being no particular news of note behind the move.

So what: No particular news today, that is to say. My best guess as to the origins of this move is that investors are having a delayed reaction of elation over an announcement Euronet actually released two days ago. To wit, its e-pay subsidiary has inked an agreement to distribute "Zynga Game Cards" for Facebook-friend Zynga in 18 European jurisdictions.

Now what: You don't even have to know what a Zynga Game Card is to guess how this news would affect Euronet's stock price. Just using the word "Zynga" in a sentence is enough to drive a stock price totally batty these days. But there's actually nothing crazy about investors' enthusiasm for Euronet.

Consider: While GAAP accounting standards paint Euronet as "unprofitable" today, the company generated $42.5 million in free cash flow over the last year. This values Euronet at about 19 times FCF -- a bit pricey for a 14.5% grower. But if the Zynga tie-up boosts Euronet's growth rate even a little bit, it could justify that valuation pretty easily. If you ask me, investors are being perfectly reasonable in buying Euronet today -- they're just a little slow out of the gate.

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At the time thisarticle was published Fool contributorRich Smithdoes not own (or short) any company named above. The Motley Fool has adisclosure policy. Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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Originally published