Headwinds Remain, but Wide-Moat Edenred Picks Up the Pace

Wide-moat Edenred delivered a positive half-year update, as we lap the easy comparatives of 2020 and the beginning of the COVID-19 pandemic. Revenue rose by more than 30% on a like-for-like basis in the second quarter, while half-year revenue now stands 10% above this point in 2019. Operating margins continued to climb, reaching 39%, 2 percentage points higher than at this point last year. Although the shares are trading down today on the release, we believe this is more a reflection of the share’s premium valuation and the market’s lofty expectations, as we view the performance over the last six months to be robust. We reiterate our EUR 42 fair value estimate for the shares.