No Slowdown in Sight for Wide-Moat Edenred

Wide-moat Edenred EDEN signed off 2022 on a strong note, with EBITDA coming in at the top end of the recently upgraded guided range. However, even more exciting was the momentum prevalent in the business, with growth picking up further in the last quarter of the year. Although we will be updating our forecasts on the back of these results, we don’t expect that any upgrade to our EUR 50 fair value estimate will be material enough to change our view on the stock. At prevailing levels we believe the shares are fairly valued.

Like-for-like revenue was up almost 20% over the year, with fleet and mobility solutions leading the charge, with growth of almost 24%. Employee benefits saw the largest pickup in the fourth quarter as the return of employees to offices helped edge growth upward. At a time of high inflation, and a tight labor market, employers have taken steps to reward employees through increased participation in the program. Despite the gloomy macroeconomic backdrop, Edenred’s rosy outlook is showing no signs of letting up, with management guiding to strong growth in 2023.

In the current macroeconomic environment, with high inflation and rising interest rates, it’s difficult to find stocks that can withstand the onslaught, let alone thrive in it. However, Edenred is well positioned, with the value of its products and services generally rising in tandem with inflation, and with positive working capital the business also benefits from rising interest rates, driving interest income higher.