Payment processing & core-banking software · Puerto Rico/Caribbean (~55%) + Latin America (~45% incl. Brazil: Sinqia, Tecnobank, Dimensa) · San Juan, PR
FCFF 3-phase · GAAP EBIT (capitalized software already on B/S) · SBC expensed · acquisitions = reinvestment · leases, MI as debt · CRP 1.5% · valued 2026-10-14
SLIGHTLY RICHRISK: HIGH
Price $30.55 · Base $26.66 · Price is +15% above base
Price (10/14 intraday)
$30.55
Base intrinsic value
$26.66
Bear → Bull range
$8 – $39
Key driver
Steady GAAP EBIT margin + Popular 2028 renewal; price needs ~23.3% with no concession haircut
The Take — Slightly rich. The "deep value" is an adjusted-EPS mirage; the business is good, the equity is levered and fully priced.
The screen sees 7.7x earnings. The owner earns 18x. Guidance is $3.94–4.04 adjusted EPS but only $1.61–1.73 GAAP — a ~$2.30/share (~$140M) gap. Some of that is genuinely non-recurring (Q2's equity-JV exit, Dimensa deal fees, a cyber incident, discrete tax). But the two biggest pieces are not: ~$80M/yr of acquired-intangible amortization (EVTC buys its growth — Sinqia $417M in 2023, Tecnobank $144M in 2025, Dimensa $199M in 2026 — so that amortization is the cost of the growth engine) and ~$31M/yr of stock comp. Our "clean" FY26E GAAP EBIT of ~$246M (22.5% margin) strips only the true one-offs.
The free cash flow everyone quotes is overstated by a third. Aggregators print FY25 FCF of $204M (OCF − capex). EVTC also spends ~$68M/yr capitalizing software development — it shows up in "purchases of intangibles," not capex. True FCF was $136M; after SBC, $106M — a 5.8% yield on a $1.83B market cap that already carries ~$1.06B of net debt plus leases and $78M of minority interest. And acquisitions ($324M TTM) consumed more than all of it: buybacks ($140M TTM at ~$25) are being funded with incremental Term-Loan debt.
The DCF: 9%→3% growth, a 21.9%→21.5% GAAP margin (≥ the FY23–25 average of 19.7%), a modest 5% concession at the Sept-2028 Popular MSA renewal, PR-grant tax of 13% rising to 20% — worth $26.66. Our Sep-4 build said ~$26; the Dimensa EBITDA and higher margins are offset by Rf +95bp and ~$230M more net debt. Reverse DCF: $30.55 needs either a ~23.3% steady margin with no Popular haircut, or ~25% faster growth every year, or a WACC near 9.7% — i.e., you must believe EVTC is a US-risk compounder, not a PR/Brazil processor at 2.5x leverage.
Why not more bearish: franchise quality is real — ATH network monopoly in PR, sticky core-banking software in Brazil (Sinqia/Dimensa), 39–40% adj. EBITDA margins, low capex intensity, and a management team that buys back stock at $25. Revenue guide was raised to $1,085–1,095M (+17%). This is not a broken business; it's a full price for a levered one.
Call:HOLD / no new money above ~$27. Accumulate below ~$23 (≈15% under base, where the buyback was executing). Trim above ~$34 (bull-case territory needing margin expansion and a clean Popular renewal). Options expression for holders: sell covered calls at the $35 strike (Dec/Jan) — that strike sits near the bull-case $39 and is a price we'd sell at anyway. To get paid to wait for the buy zone: cash-secured puts at the $25 strike, 60–90 DTE. EVTC options are thin — use limits at mid and small size. Q3 print in early November; watch the Popular CPI escalator reset (Oct-2026), Dimensa margins, and whether the cyber costs recur.
Risk Profile — HIGH
HIGH
Popular concentration / 2028 cliff — Banco Popular = ~29% of FY25 revenue; the A&R MSA runs to Sept 2028 (ATH 2030, ISO 2035). A 10% price cut already hit in Q4-25. Short: renewal concessions; each 10% of Popular revenue ≈ $32M of EBIT ≈ $4.70/share.
HIGH
Financial leverage in the equity — net debt + leases ≈ $1,064M (2.5x adj. EBITDA, ~4.3x clean EBIT). Floating-rate term loan: long Fed hiking bias = short EVTC. A 10% move in enterprise value is ~16% in the stock.
MED
BRL / LatAm FX & country risk — Brazil now ~27% of revenue (Sinqia, Tecnobank, Dimensa). H1-26 got a $15.8M FX tailwind; a permanent 15% BRL slide costs ~$1.90/share. Short: BRL, Brazil fiscal stress.
MED
M&A execution — three Brazilian deals in 3 years; goodwill $1.07B > book equity. Integration costs and earn-outs keep "one-time" items recurring. Long: synergy delivery; short: impairment.
MED
Puerto Rico tax grant — ~11–12% adj. ETR depends on PR incentives and mix; LatAm mix pushes it up. Terminal tax 20% assumed; 25% costs ~$1.90/share.
What the "inventory" really is: a PR transaction utility rented largely to one bank on a contract that reprices in 2028, plus a roll-up of Brazilian bank/insurer software bought with debt. The cash engine is real; the per-share claim on it is diluted by leverage, minority holders (Tecnobank 25%) and the amortizing cost of buying growth.
Scenario values per share vs price
Bear: growth 5%→3%, margin 21%→17.5%, 15% Popular concession at 2028 renewal, BRL −15% (value $8.29; equity is ~40% of EV so it gears hard). Base: 9%→3%, 21.5%, 5% concession. Bull: 11%→3%, 24%, clean renewal. Prob-weighted 25/50/25 = $25.15. Dashed line = price.
Driver tornado — value/share from base $26.66
Only two single legs clear the price: margin +2pt to 23.5% ($30.99) and a 75bp-lower stable WACC. Even a concession-free Popular renewal alone gets $29. Every bar is wide because equity is a thin slice of EV — leverage, not the business, is what makes this HIGH risk.
Red = >15% below price, amber = within ±15%, green = >15% above. Stable-phase WACC capped at 9.0%. Price ≈ a 23.3% steady margin at our WACC, or our 21.5% margin at a ~9% WACC (i.e., no country/leverage premium).
History — revenue ($M, bars) vs GAAP EBIT margin (line)
Margin fell from 33% (FY21, pre-Sinqia, pre-Popular discount) to a ~20% plateau as LatAm mix and acquired-intangible amortization rose. The 5-yr average (23.6%) is inflated by the pre-acquisition FY21–22; the post-Sinqia FY23–25 average (19.7%) and FY26E clean (22.5%) frame our 21.5% steady state.
GAAP EBIT from stockanalysis/S&P (10-K). Software development: EVTC already capitalizes it (purchases of software & intangibles, 7–10% of revenue) and amortizes it through D&A, so GAAP EBIT is on a capitalized basis and needs no R&D adjustment — but "True FCF" must subtract it. SBC kept as an operating cost (Damodaran).
What normalization says. 5-yr average EBIT is $168M — but on a business that grew 58% by acquisition, a dollar average understates run-rate. Normalizing on margin instead: FY23–25 average 19.7%, FY26E clean 22.5%. We use 22%→21.5% (credit for Dimensa scale, a haircut for recurring integration costs of a serial acquirer). On FY26E revenue that is ~$235M EBIT vs the prior build's $169M 5-yr average — the business has grown into a bigger base; the equity value didn't follow because the growth was bought with debt.
Cash-conversion check: 5-yr cumulative true FCF $717M, after SBC $597M; acquisitions over the same window $640M and buybacks $348M. Debt funded the gap.
Base-case FCFF ($M)
Year
Revenue
EBIT %
EBIT
Tax
Reinvest
FCFF
WACC
PV
2027
1188
21.9%
260
13%
65
161
10.2%
146
2028
1271
21.8%
277
13%
55
186
10.2%
153
2029
1354
20.5%
277
13%
55
186
10.2%
139
2030
1435
20.4%
293
13%
54
201
10.2%
136
2031
1514
20.3%
308
13%
53
215
10.2%
132
2032
1590
20.4%
324
14%
50
227
10.0%
127
2033
1661
20.4%
339
16%
48
238
9.7%
121
2034
1728
20.4%
353
17%
44
248
9.5%
115
2035
1788
20.4%
366
19%
40
257
9.2%
109
2036
1842
20.5%
377
20%
36
266
9.0%
104
Terminal
g 3.0%, stable ROIC 11% → reinvest 27% of NOPAT, tax 20%, stable WACC 9.0%
TV 3,763
1,468
PV explicit 1,281 + PV terminal 1,468 = operating assets 2,749. Terminal share 53% (under the 70% flag). Margin dip in 2029 = 5% Popular concession (~$17M EBIT) from the Sept-2028 renewal. Sales-to-capital 1.5 (organic + tuck-ins; large M&A not modeled — it has been value-neutral at best). Yr-1 after-tax ROIC 12.7% on $1,783M invested capital (incl. $1.07B goodwill) — modestly above WACC, consistent with a fair-not-cheap verdict.
Cost of capital
Risk-free (10Y UST after Sept-2026 spike)
5.20%
Mature ERP
4.40%
Country risk premium (revenue-weighted: PR ~0.5% on ~55%, Brazil ~3%, Mexico/Chile/Colombia ~1–3% on ~45%)