NYAX

We rate Nayax Ltd. (NYAX) as a Buy with a composite score of 67.9/100 at a current price of $52.07. The stock scores above average across the majority of our six quantitative factors and ranks #158 out of 7,333 stocks in our universe, reflecting a favorable risk-reward profile.

The rating is primarily driven by strength in momentum (87th percentile) and stability (83th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (35th percentile) and value (51th percentile) tempers our overall conviction. We assign a Narrow Moat rating (47/100), Medium uncertainty, and Poor capital allocation.

Key items to watch: sustainability of the current growth rate; the path to profitability. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Nayax Ltd. holds an above-average position (#16 of 50) within the Services sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 67.9/100 places it at rank #158 in our full 7,333-stock universe. At $972M in market capitalization, Nayax Ltd. is a small-cap player in the Services space, which limits certain scale advantages but may allow for more agile strategic execution.

The near-term outlook is constructive, with revenue growing at 33% and momentum in the 87th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 35th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 45% (-15.0pp vs sector) narrow to operating margins of 2% (-1.1pp vs sector) and net margins of -1.8%, yielding a gross-to-net conversion rate of -4%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $52.07, Nayax Ltd. is trading near fair value based on current fundamentals. Our value factor score of 51/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at EV/EBITDA of 20.4x (at a premium), P/B of 12.5x, P/S of 1.6x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Medium uncertainty rating to Nayax Ltd.. The stock presents a balanced risk profile: current negative profitability (net margin -1.8%) and low beta of 0.56 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: current negative profitability (net margin -1.8%); low beta of 0.56 — while defensive, this may indicate limited upside participation in bull markets. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 83th percentile and quality factor at the 70th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 45% provide a buffer against cost pressures; above-average stability (83th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate Nayax Ltd.'s capital allocation as Poor. Key concerns include low returns on equity (-13.6%), negative profitability, weak asset returns (ROA -5.2%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Nayax Ltd. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Nayax Ltd. receives a Buy rating with a composite score of 67.9/100 (rank #158 of 7,333). Our quantitative framework assigns a Narrow Moat (47/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 65/100.

Our analysis supports a constructive view on Nayax Ltd.. The combination of identifiable competitive advantages, medium uncertainty, and poor capital allocation creates a risk-reward profile that favors accumulation at current levels. We recommend investors consider adding this name to portfolios aligned with the stock's risk profile.