Corpay, Inc. (CPAY)

By both methods, the value today (DCF $562 · Multiples $439) exceeds the market price ($398).

Today — fairly valued: at $398 trades ~9.4% below its value discounted to today (~$439); the discount is positive but does not reach the margin of safety we require (≥38%).

At 5 years — En valor: the target price ($547) plus dividends yield between the 4% floor and the 10% average return — a reasonable return, though without the margin of a great investment.

The bridge: the return at 5 years exceeds the risk-free rate (4.5%) — but the discount does not reach the required margin of safety (≥38%). To require a 15% annual return, it would need to be bought at ~$272.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($398) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (2.1%/year) than we project (10.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.2 bn of owner earnings in year 5 (vs ~$1.7 bn of our base case). It recalculates if the DCF assumptions are edited.

Year-by-year projection of the selected scenario. From each year, two versions of the flow are derived: growth FCF (operating flow − total capex, the cash surplus) and maintenance FCF (the owner earnings: what the business yields if it only sustains its capacity). The flow is returned almost in full (dividend + buyback) or redeployed into the operation, so that EV stays roughly flat and multiples compress because the metric grows, not because of cash accumulation. The valuation is done on NOPAT (EV/NOPAT). In edit mode, revenue, margins, capex, and exit multiples can be adjusted.

Corpay is valued at the enterprise level, on a multiple of after-tax operating income, precisely because it is a levered serial acquirer: total debt (~US$15,100 million) funds much of the acquisition strategy (GPS Capital Markets, Paymerang) and has to be visible in the bridge. The metric is pre-interest, so the funding is charged once and not twice. Year 1 starts from the company's guidance in the 8-K of 5-Aug-2026 (revenue +17% and diluted earnings per share of between US$19.50 and US$19.90 at the midpoint), not from the filing's historical trajectory, following the rule that current guidance prevails over the trend (R1 prior). The TTM net margin (22.7%) regains ground in year 1 toward ~24% because the FTC charge of the second quarter of 2026 does not repeat and the integration of the large 2024 acquisitions matures. The revenue path decays geometrically from 14% in year 1 to 8.5% in year 5, a durable level befitting a capital-light payments platform with a still-wide bolt-on acquisition runway (the band of a quality compounder with a reinvestment runway, 8-15%). The bear case does not receive the guided margin rebound (it stresses year 1 with growth of 9%, well below guidance) and the bull case receives it in full plus a recovery in Lodging Payments. The share count keeps falling on net buybacks (historically ~4%/year 2022-2026) but at a moderate 3%/year in the base case, without extrapolating the accelerated 2025-2026 pace that was partly funded by one-off divestiture proceeds (the sale of PayByPhone and of the BP portfolio, non-recurring). The exit multiple sits within the payments archetype band (15-20x), positioned in the lower half (16.5x base) because the return on invested capital comes in just below the 10% bar —structurally depressed by the goodwill accumulated from acquisitions, not by poor unit economics— and the moat was rated narrow given intense niche competition by segment.

Today's elevated multiple is the price of growth: if the business grows, the entry point cheapens on its own going forward (the metric grows while EV stays roughly flat). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—, so the value curve shows whether value creation is concentrated in the early or the later years. The required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $547 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $398, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $547 in 5 years and a required return of 4.5% annually, the maximum to pay today is $439. Against the current market price ($398), the margin of safety is 9.4% (trades below the maximum → there is margin) and the total return at that price would be 6.6% annually.

• Entry multiple. Trades at 25× on today's net income attributable to common.
• Expected 5-year return. The base scenario implies a return of +7% against the market price.
• Guidance already recognized. The market already recognizes the growth guidance and the sustained buyback.

Each margin over sales, year by year: historical (solid line) → projection (dotted).

• ✕ ROIC exceeds the cost of capital (~10%)
• ✓ CFROIC backs up the ROIC (132%, cash vs. accruals)
• ✕ Healthy balance sheet (low corporate debt)
• ✓ Durable competitive moat (multiple advantages)

• Cash generation. Operating cash flow is volatile year to year due to the payments business's working capital, though it stays positive and consistent in magnitude.
• Return on capital. The 9.8% sits just below the 10% bar, weighed down by goodwill accumulated through acquisitions, not by poor unit economics.
• Reinvestment runway. Bolt-on acquisitions and corporate FX cross-selling following GPS Capital Markets offer a still-ample runway of incremental growth.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

Each Corpay segment moves on its own volume × price pair: Corporate Payments on spend volume processed × revenue per dollar of spend (compressed by the mix shift toward higher-volume clients following the acquisitions); Vehicle Payments on fuel, toll, and parking transactions × revenue per transaction (stable, partly tied to fuel price); and Lodging Payments on managed hotel room nights × revenue per night (volume falls with lower emergency relocation activity, partly offset by higher price). There is no single consolidated driver: each business line requires its own volume-and-price pair to be read correctly.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Organic growth. 10% organic growth in 2025, with Corporate Payments as the main engine.
• FY2026 guidance. Revenue guided +17% and adjusted net income per share +28% at the midpoint for 2026.
• Lodging in decline. Fell 3.9% in 2025 on lower emergency relocation activity.

• Recurring, volume-based revenue. Transactional monetization (fee or spread) on spend volume, with recurring revenue and low incremental infrastructure needs at scale.
• Proprietary networks. Sem Parar in Brazil and the virtual-card acceptance networks are assets that are difficult to replicate in their geography.
• Intense segment competition. Each business line faces well-capitalized niche specialists (WEX, Edenred, American Express, Coupa), which pressures pricing.
• Geographic diversification. 51% of 2025 revenue was denominated in currencies other than the dollar, reducing dependence on a single market.

Not all debt is equal: only the structural needs refinancing; the rest is operational (self-liquidating).

Structural debt is what is exposed to the contraction phase of the cycle; operational debt (leases, matched funding) self-liquidates with the business.

• ✓Leverage (net debt / EBITDA)Net cash $0 bn
• !Interest coverage (EBIT / interest)4.2x
• –Liquidity (current ratio)no data
• ✓Cash quality (CFROIC vs ROIC)CFROIC backs 132% of ROIC
• ✕Value creation (ROIC − 10% bar)-0pp
• ✓Malinvestment test (capex vs incremental ROIC)Capex/D&A 0.5x — no over-investment
• ✓Float / working capitalFrees up cash $0.2 bn (float / negative WC)
• ✓Dilution (SBC % of revenue + shares)SBC 2.3% of revenue

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

• Elevated leverage. Total debt of approximately US$15,100 million against equity of US$3,500 million, a product of the acquisition strategy.
• Liquidity. Cash and equivalents of approximately US$3,200 million at the close of the second quarter of 2026.
• Interest coverage. TTM EBIT (US$2,200 million) comfortably covers the debt's estimated interest expense.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• CEO tenure. Ronald Clarke has spent more than 25 years as CEO and chairman of the board, with proven strategic continuity.
• Acquisition track record. Active acquisition strategy (GPS Capital Markets, Paymerang) that sustains growth but raises balance-sheet leverage.
• Sustained buybacks. Buybacks of ~US$1,800 million over the trailing twelve months with no dividend, though part was funded with proceeds from one-off divestitures.

• A recent track record of declining margins (from 27.9% in 2022 to 22.7% in the TTM) that generated caution over the pace of integrating the large 2024 acquisitions (GPS Capital Markets, Paymerang).
• The preliminary US$100 million charge for the settlement with the Federal Trade Commission in the second quarter of 2026 introduced near-term regulatory uncertainty over fuel-card sales practices.
• Elevated leverage (total debt of approximately US$15,100 million against equity of US$3,500 million) keeps return on capital just below the 10% bar, capping multiple expansion until the balance sheet deleverages.

It trades close to intrinsic value, far from the required margin of safety. This is not a case of missing buyers or evident motivated sellers: the market already recognizes the 17% growth guidance for 2026 and the sustained buyback. The expected return of +7% reflects a reasonably valued quality business more than a gap between perception and reality — balance-sheet leverage and a return on capital just below the 10% bar are the structural explanation for the multiple, not a market anomaly to be corrected.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -5%/year (-22% total): the margin of safety protects the downside. The bull (+14%/year, +97% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Regulatory (FTC). The preliminary US$100 million settlement with the FTC could lead to additional restrictions on fuel-card sales practices.
• Integration risk. The active acquisition strategy raises execution risk and the risk of goodwill impairment if integration underdelivers.
• Cybersecurity. Dependence on computer systems that process sensitive financial data at large scale, with the risk of a breach or service disruption.
• Leverage and rates. A higher-for-longer rate cycle would raise refinancing costs on the US$15,100 million of debt.

Each thinker's analytical framework applied to our data.

• Buffett / Graham Quality + margin of safety

  Fails the quality gate: ROIC barely matches the 10% bar (the market's opportunity cost), no excess return.

• Peter Lynch Growth at a reasonable price (GARP)

  A fast grower growing 10% at a multiple/growth of 2.5 → expensive for its growth.

• Joel Greenblatt Cheap and high-return (Magic Formula)

  Earnings yield 8% (EBIT/EV) + ROIC 10% → falls outside the Magic Formula.

• Howard Marks Perception vs reality + cycle

  The price discounts 2% vs our 10%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth Klarman Capital protection (bear scenario)

  Bear-scenario floor -5%/yr, bull-scenario ceiling +14%/yr over 5y: reasonable asymmetry, without an ample cushion.

• Pat Dorsey Moat strength (Five Rules)

  A narrow moat, stable; sources: network effects, intangibles, switching costs, cost advantage, efficient scale → partially passes the Five Rules.

• Aswath Damodaran Expectations implied by the price

  Justifying the price requires discounting 2%, within what we project (10%) — the story squares with the numbers.