d local is an international payment company that is currently in hyper growth mode does this stock
deserve a spot in your portfolio we just completed an hour-long deep dive into d-local here's the
bull and bear case in about five minutes my name is Brian Feroldi and my name is Brian Stoffel
in layman's terms what does d-local do what d-local wants to do is help big companies
reach customers in emerging markets and emerging markets is the key word here most of its focus
right now is in latin america but they also have operations in africa the middle east and
asia and coordinating different currencies payment methods and laws and regulations in each of these
it very easy for its customers to get on board with its technology and they can start sending
and receiving payments in all those countries immediately so how is the company done with this
product well we want to point out that they've only got about 340 customers that might seem low
but we're talking about some of the biggest customers in the world like microsoft and nike
when we look at total payment volume which is the amount of cash that's flowing through d local we
saw that it was growing at about a hundred percent per year in other words it was doubling about
every year however if we compare the first half of this year to the first half of 2020 which is
a little bit sandbagging which is a little bit unfair because everybody was going into lockdown
to the beginning of 2020 that being said it is more than tripling it is up 224 year-over-year in
other words as brian said hyper growth so what's the bold case for investors moving forward well
number one the growth has been absolutely incredible this company is producing 200
plus growth rate and it still has a huge growth runway ahead of it not only is it growing fast but
it's doing so profitably you don't see that very often with payment companies that are relying on a
certain level of scale to bring in profitability but this company just went public it only has
about 340 merchants on board and it is still profitable that's a big deal because it gives it
flexibility moving forward third there's a reason to believe this company is already building itself
out in moat once they one of its customers gets on board it tends to stay very loyal to this product
one of the reasons i think is because it's so simple to do so but the numbers clearly prove once
a customer gets on board not only do they stick with d local but their spending rapidly rises
over time as exciting as all that is we need to temper that enthusiasm by looking at the bear case
first and foremost is competition there are a lot of global players in the payment space but
there's also a lot of smaller players working in each of the locales where d local is set up
we need to keep an eye on how the company is doing versus that local competition two is just the fact
that this company is operating in countries that aren't necessarily stable politically if there was
civil unrest in one of its major markets that could spell trouble for investors
and third because they're focused on huge customers there is concentration risk to be
wary of the company's top 10 customers account for an enormous portion of sales that should improve
over time and it's not d local's fault that it has that risk but it's still worth acknowledging so
how did d local score on our investing checklists on my investing checklist this company got a 71.
that's already in my investable category which is particularly impressive considering this company
hasn't even been public for six months and on my framework it got an eight and a half now
that's definitely in the investable region and the only reason the score wasn't higher was because i
took points off for the concentration risk we just mentioned so what should investors watch
moving forward the first thing to keep an eye on is that net revenue retention rate that
figure will tell us if the company's customers are staying loyal and if they're spending more
over time second we want to keep an eye on those concentration risks and importantly what we want
to see is that the top 10 customers start becoming less and less and less a percentage of total sales
but we do want to see that number tick up over time if you want to learn more about d local's
business click the link on your screen to watch our full deep dive analysis of it brian's out