Is the EML (ASX:EML) share price a bargain after falling 30% in a month?

The EML Payments Ltd (ASX: EML) share price has fallen by 30% in just one month.

That adds to the pain that shareholders have already experienced in the past year. EML shares are now down 55% in the last 12 months.

What’s going on with the EML Payments share price?

The diverse payments business is seeing a decline at the moment, just like plenty of other ASX shares.

Indeed, most of the S&P/ASX 200 Index (ASX: XJO) was in the red yesterday, though some in the resources sector saw gains.

The ASX share market continues to be volatile amid the Russian invasion of Ukraine.

Looking at some of the ASX’s other growth shares, in the past month the Xero Limited (ASX: XRO) share price has fallen by 17% and the Aristocrat Leisure Limited (ASX: ALL) share price has declined by around 20%.

Not only do investors have to contend with the geopolitical worries of what’s happening in Europe, but there is also the prospect of rising interest rates. The boss of the Federal Reserve, Jerome Powell, has confirmed that the US interest rate will rise in March 2022.

Why do interest rates matter for the EML Payments share price? Or any asset? Warren Buffett said at the 1994 Berkshire Hathaway annual general meeting (AGM):

The value of every business, the value of a farm, the value of an apartment house, the value of any economic asset, is 100% sensitive to interest rates because all you are doing in investing is transferring some money to somebody now in exchange for what you expect the stream of money to be, to come in over a period of time, and the higher interest rates are the less that present value is going to be. So every business by its nature … its intrinsic valuation is 100% sensitive to interest rates.

Is the EML Payments share price an opportunity?

The brokers at Macquarie think so, with a buy rating and a price target of $3.80. That implies a potential upside of around 70% over the next year if the broker ends up being correct.

The broker noted that EML didn’t quite hit the mark with revenue in its FY22 half-year result because of Omicron which hurt the shopping centre transaction volume. However, with the company leaving the main worries of the Central Bank of Ireland (CBI) behind it, Macquarie suggests EML could start to turn things around.

In that interim result, EML generated 20% revenue growth to $114.4 million and underlying net profit (NPATA) growth of 6% to $13.1 million.

The brokers UBS and Ord Minnett also rate EML as a buy, with respective price targets of $4.55 and $4.03.

Valuation

According to the profit estimates from Macquarie, the EML share price is now valued at 17x FY23’s estimated earnings.

The post Is the EML (ASX:EML) share price a bargain after falling 30% in a month? appeared first on The Motley Fool Australia.

More reading

• Glitch! Why are ASX tech shares getting hammered on Monday?
• ASX tech shares take a hammering on Friday
• 4 ASX shares that love rising interest rates: report
• EML Payments (ASX:EML) share price just hit a 52-week low, is it a buy?
• Why EML (ASX:EML) shares could be set for a rebound, but not for the reason you might think

Motley Fool contributor Tristan Harrison has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns and has recommended EML Payments and Xero. The Motley Fool Australia owns and has recommended EML Payments and Xero. The Motley Fool Australia has recommended Macquarie Group Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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