CPAY Corpay
Quality payments compounder priced as a grower; peak margins and acquisition-heavy capital leave little room for upside.
The story
Corpay is a high-margin B2B payments franchise in fleet cards, corporate payables, cross-border FX and lodging, built through serial acquisitions and protected by network scale and sticky customer relationships. It is a maturing compounder: organic growth sits in the high single digits, reported growth gets a lift from deals, and margins near 42-44% look like a peak. Heavy acquisition goodwill keeps capital efficiency low, and leverage is meaningful.
Y1 growth goes from 7% to 9% (+29% relative) because TTM revenue of 5.02B is about 11% above the last fiscal year's 4.53B, helped by acquisitions and stronger cross-border volume. Margin, reinvestment, risk and horizon stay where they were: the 40% target still reflects regulatory and fuel-price pressure fading margins off their peak, the 0.36 sales-to-capital reflects acquisition-led growth, and beta 1.15 with 7.6B of net debt reflects the leverage.
Value drivers
| Revenue growth (Y1) | 9.0% |
| Terminal growth | 3.5% |
| Forecast horizon | 8y |
| Target operating margin | 40.0% |
| Years to target margin | 5 |
| Sales-to-capital | 0.36 |
| Beta | 1.15 |
| Failure probability | 3.0% |
| Cost of capital (WACC) | 9.1% |
| Terminal WACC | 8.6% |
Valuation bridge
| PV of explicit FCFF | 4.31B |
| PV of terminal value | 15.27B |
| Equity value | 11.29B |
| ÷ shares → per share | $171.98 |
Projected free cash flow to the firm
| Yr | Revenue | Growth | Margin | NOPAT | Reinvest | FCFF | PV |
|---|---|---|---|---|---|---|---|
| 1 | 5.47B | 9.0% | 41.6% | 1.58B | 1.26B | 327.80M | 300.45M |
| 2 | 5.92B | 8.2% | 41.2% | 1.70B | 1.25B | 447.81M | 376.22M |
| 3 | 6.36B | 7.4% | 40.8% | 1.80B | 1.22B | 582.81M | 448.78M |
| 4 | 6.78B | 6.6% | 40.4% | 1.91B | 1.17B | 731.89M | 516.56M |
| 5 | 7.18B | 5.9% | 40.0% | 2.00B | 1.10B | 893.61M | 578.09M |
| 6 | 7.55B | 5.1% | 40.0% | 2.10B | 1.01B | 1.09B | 644.54M |
| 7 | 7.87B | 4.3% | 40.0% | 2.19B | 898.33M | 1.29B | 701.28M |
| 8 | 8.14B | 3.5% | 40.0% | 2.27B | 765.08M | 1.50B | 747.31M |
Key risks
- Regulatory and litigation scrutiny of fleet-card fees (FTC history) compressing take rates
- Acquisition integration risk and overpaying with 10B of debt on the balance sheet
- Fuel-price and macro sensitivity in fleet and lodging volumes, plus FX volatility in cross-border
Catalysts
- Corporate payments and cross-border becoming most of the mix, lifting organic growth
- Divesting lower-growth units and paying down debt or buying back shares