Why Net 1 UEPS (UEPS) Stock Is Down Today

NEW YORK (TheStreet) -- Net 1 UEPS  (UEPS) dropped Thursday after The Constitutional Court of South Africa, the nation's highest court, ordered the cancellation of a contract awarded to the electronic payment systems technology company.

The court ordered the government to open a new tender to disseminate social welfare grants just four months after it invalidated a $947 million contract won by Net 1. The court permitted Net 1 to continue providing grants to millions of pensioners on the state's behalf until the issuing of a new five-year tender, the company announced Thursday. Net 1 also said The South African Social Security Agency (SASSA) would have 30 days to come up with a new tender.

"The tender - one of the largest in South Africa's history - was for the provision of social grants to approximately 15 million beneficiaries. The merits judgment held that the tender awarded to Cash Paymaster Services Ltd by the South African Social Security Agency, or SASSA, was unlawful," the court wrote on its website. "In today's unanimous judgment, written by Froneman J, the Court declared the contract between SASSA and Cash Paymaster for the payment of social grants invalid and ordered that the tender process be re-run."

The stock was down 11.46% to $8.42 at 2:11 p.m. More than 2.2 million shares had changed hands, well above its average volume of 132,366.

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Separately, TheStreet Ratings team rates NET 1 UEPS TECHNOLOGIES INC as a "hold" with a ratings score of C+. TheStreet Ratings Team has this to say about their recommendation:

"We rate NET 1 UEPS TECHNOLOGIES INC (UEPS) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance and attractive valuation levels. However, as a counter to these strengths, we find that we feel that the company's cash flow from its operations has been weak overall."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 11.5%. Since the same quarter one year prior, revenues rose by 23.2%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 366.66% and other important driving factors, this stock has surged by 37.19% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, our hold rating indicates that we do not recommend additional investment in this stock despite its gains in the past year.
  • NET 1 UEPS TECHNOLOGIES INC reported significant earnings per share improvement in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, NET 1 UEPS TECHNOLOGIES INC reported lower earnings of $0.29 versus $1.00 in the prior year. This year, the market expects an improvement in earnings ($1.40 versus $0.29).
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Software industry and the overall market, NET 1 UEPS TECHNOLOGIES INC's return on equity is below that of both the industry average and the S&P 500.
  • Net operating cash flow has significantly decreased to -$27.25 million or 293.75% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: UEPS Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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