Corpay: A GARP Investor's Dream in 2025

The GARP (Growth at a Reasonable Price) investment strategy seeks companies that blend robust growth with undervalued stock prices relative to their earnings and cash flow. Corpay, a leader in payment solutions, emerges as a compelling candidate in 2025, thanks to its strategic acquisitions, accelerating segment growth, and fortress-like free cash flow. Let's dissect why this makes Corpay a standout GARP opportunity.

Strategic Acquisitions: Fueling Segment Dominance

Corpay's recent acquisitions—AvidXchange (a take-private partnership with TPG) and GPS Capital Markets—are masterstrokes that diversify its revenue streams and deepen its moat.

• AvidXchange: Securing a 33% stake in this AP automation platform (with an option to fully acquire by 2028) adds 8,500+ customers in high-growth sectors like real estate and HOAs. This segment's 19% organic revenue growth (per Q1 2025 results) positions it as a cash cow, with minimal working capital exposure.
• GPS Capital Markets: A $725M deal that adds cross-border payment expertise, boosting Corpay's global footprint to 23,000 clients in 145 currencies. Combined with Paymerang (another 2024 acquisition), these moves are projected to contribute $200M+ in revenue and $0.50 EPS accretion by 2025.

These moves exemplify GARP's core tenet: growth via disciplined M&A that enhances profitability, not dilution.

Financial Fortitude: EBITDA Margins and Free Cash Flow

Corpay's financials underscore why its valuation is compelling:

• EBITDA Resilience: Despite 2025's macro headwinds (rising fuel prices, FX volatility), Corpay's Adjusted EBITDA margin expanded to 53.6% in 2024, up from 53.1% in 2023. The Corporate Payments segment's high teens organic growth shields margins, while cost discipline ensures scalability.
• Free Cash Flow (FCF) Surge: Management projects $1.5B FCF in 2025, a 20%+ increase from 2024's run rate. This “meaningful firepower” funds accretive deals (like AvidXchange) and buybacks while maintaining a conservative 2.75x leverage ratio.

Valuation: A Bargain for Growth

Corpay trades at 12.5x 2025E EPS ($20.80–$21.20), well below its five-year average of 14.2x. Meanwhile, its ROIC (Return on Invested Capital) of 18%+ and FCF yield of ~7% suggest the stock is priced for stagnation, not growth.

The GARP investor's edge here is clear:
- Growth Catalysts: Corporate Payments ($1.5B+ revenue in 2025) and cross-border solutions (via GPS) are scaling rapidly.
- Margin Stability: Despite macro risks, EBITDA margins are expected to hold due to automation efficiencies and pricing power.
- Balance Sheet Flexibility: $1.5B FCF in 2025 allows reinvestment without overleveraging, a stark contrast to peers burning cash.

Risks and Mitigants

• Macroeconomic Headwinds: Fuel prices and FX could crimp near-term earnings. However, Corpay's long-term contracts and geographic diversification (6 continents) act as buffers.
• Integration Risks: GPS and AvidXchange's success hinges on seamless assimilation. Yet, Corpay's track record—smooth Paymerang integration in 2024—builds confidence.

Conclusion: A GARP Winner in 2025

Corpay combines high-growth segments, strong free cash flow, and a reasonable valuation into a GARP investor's dream. With its acquisitions unlocking new markets and its EBITDA resilience defying macro challenges, the stock offers a rare blend of growth and safety.

Investment Recommendation:
- Buy: For GARP portfolios seeking exposure to fintech and cross-border payment growth.
- Hold: If macro risks materialize beyond 2025.

The takeaway? Corpay isn't just keeping pace—it's accelerating ahead. A 2025 investment here could prove a masterclass in GARP discipline.