Wise: revenue growth slows to 21%, but the shares still offer decent value

Down 2% at 881.8p (£9.04bn) - Q2 FY27 Trading Statement

Familiar themes at this currency specialist: double-digit growth across all key measures, combined with a reduction in the "take rate".

The ongoing reduction in take rate is explained like this: "we continued to proactively invest part of our operating leverage to further strengthen our competitive advantage of lower prices for customers ".

Let's do a quick comparison against the Q1 trading update:

We can see modest reductions in the year-on-year growth rates between the two tables: revenue growth falls from 25% to 21%, and customer growth falls from 21% to 20%.

Turning back to today's update, and the outlook statement:

Wise now expects FY27 net revenue growth to be in the upper half (17.5% - 20%) of our 15-20% medium-term target range on a constant currency basis

Wise continues to expect FY27 income before tax ('IBT') margin around the top of our 20-25% range. For H1FY27, we expect the IBT margin to be c.23%, including one-off expenses equivalent to c.2ppts. This includes c.$15 million relating to the dual listing of Wise.

This strikes me as an impressive profit margin, whether or not you include the one-off expenses.

CEO comment:

"More than 12 million customers chose Wise this quarter to move over $70 billion around the world, paying 49bps on average, with 78% of transfers completed instantly. Customers are also using Wise for more of their everyday financial needs - spending $14 billion on Wise cards and increasing holdings to $44 billion.

Graham's view

We last mentioned this one in July, on the news that Wise had been denied in its US application for a national trust bank charter.

That's not a full banking licence, but it would have strengthened Wise's position in the United States - getting more control over the financial infrastructure it uses.

As things stand, Wise in the US is licensed only as a money transmitter, and has to rely on fully-licensed banks in order to operate. It will make another application to upgrade its status in US at some point.

I stayed positive on this stock in July, when that disappointing news was released (circled in red):

Today, there are again a few reasons for possible caution.

Growth rates have receded a little, and the company continues to voluntarily sacrifice margin on currency exchange.

But I am staying positive once again today.

The reason is simple: I continue to view Wise as offering decent value in the context of a high-quality, fast-growth international fintech brand.

If the earnings multiple was 30x or higher, I'd have to stop and think a little longer about this. But at 18x, for an exceptional company, I don't need to demand that every trading update is perfect. I think Wise is on track to be a much bigger business in 3-5 years than it is today, so I'm staying positive.