Nayax (NYAX): Is a 5.2x P/S Ratio Justified by Its Revenue Growth Trajectory?

Nayax (NASDAQ:NYAX), a leading provider of payment and IoT solutions, has drawn investor attention for its elevated price-to-sales (P/S) ratio of 5.2x as of July 2025. This figure stands out in a market where nearly half of its Israeli Electronic industry peers trade below 2.7x. While skeptics might argue that this premium valuation is excessive, a closer look at Nayax's financial performance, growth drivers, and strategic initiatives reveals a compelling case for its elevated multiple.

The Case for Nayax's High P/S Ratio

The P/S ratio measures investor confidence in a company's ability to monetize its sales. For Nayax, this premium reflects expectations of outsized revenue growth. The company's trailing twelve-month (TTM) revenue as of December 2024 was $314 million, a 34% year-over-year increase driven by its recurring revenue streams—payment processing fees and SaaS subscriptions, which grew 47% to $222 million, or 71% of total revenue.

The 31% revenue growth expected in 2025 (per management guidance) further justifies this valuation. By contrast, the broader Electronic industry in Israel is projected to grow only 21%. Nayax's dominance in high-margin segments like recurring revenue and its expanding IoT ecosystem—now managing 1.33 million devices—position it to outpace peers.

Revenue Growth: A Multi-Pronged Engine

1. Recurring Revenue Dominance:
2. $62.2 million in Q1 2025 from recurring streams (up 35% YoY), now comprising 77% of total revenue.

3. A 128% net retention rate underscores sticky customer relationships.

4. Strategic Acquisitions:

5. The Inepro Pay acquisition in April 2025 expanded its Benelux presence, while the UPPay integration added 25,000 devices to its network.

6. Margin Expansion:

7. Gross margins rose to 49% in Q1 2025, driven by hardware margin improvements (39.5% vs. 27.3% in 2024).
8. Adjusted EBITDA hit $9.7 million (12% margin), up from $3.6 million in Q1 2024.

Risks and Considerations

• Valuation Sensitivity: A P/S of 5.2x leaves little room for error if revenue growth slows. Competitors like Square (SQ) and Adyen (ADYEN) trade at lower multiples despite similar growth trajectories.
• Debt Levels: While cash reserves hit $177 million, total debt stands at $142 million, requiring careful capital management.
• Execution Risks: Integrating acquisitions and scaling IoT solutions hinge on flawless execution.

Investment Takeaway

Nayax's premium valuation is not without merit. Its recurring revenue model, margin improvements, and strategic moves into high-growth IoT markets align with its 30-35% 2025 revenue target ($410–425 million). While the P/S ratio is elevated, it reflects a premium on growth, not overvaluation.

For investors willing to pay for growth, Nayax offers a high-risk, high-reward opportunity. Those comfortable with volatility might consider a gradual entry at current levels, with a focus on confirming Q2 2025 revenue beats (data expected by August 2025). However, if growth slows or valuation multiples compress, the stock could face downward pressure.

In conclusion, Nayax's P/S ratio is a bet on its ability to sustain hypergrowth. Investors bullish on its IoT and payment-tech dominance may find the premium justified, while skeptics will await clearer proof of execution.

Final Verdict: Hold for now, but monitor Q2 results closely. A beat could validate the P/S ratio; a miss may invite a reevaluation of the growth narrative.