DLX

Deluxe ($DLX) Executives' Continuous Buying Followed by Earnings Surprise... 35% Undervaluation Attraction Emerges

09/12/2025 15:47

Deluxe Corporation ($DLX) is capturing investor attention as CEO Barry McCarthy and SVP William Zint have been consistently purchasing shares since 2024, coinciding with the company's August earnings that significantly exceeded analyst expectations. Deluxe is a 110-year-old Minnesota-based company founded in 1915, originally as a check printing business but now evolved into a diversified technology solutions provider serving small and medium-sized businesses and financial institutions. The company operates through four main segments: Merchant Services, B2B Payments, Data Solutions, and Print. Recent strategic expansion includes the acquisition of CheckMatch from J.P. Morgan's Kinexys to extend digital lockbox payment capabilities. The most striking aspect of insider trading analysis is the consistent buying pattern by executives. CEO McCarthy has purchased approximately $220,000 worth of shares across four transactions from June 2024 to March 2025, while SVP Zint has also maintained regular purchases during the same period. Notably, their buying timing precisely coincided with stock price declines - after the stock fell from its $22 highs to the $18 range in August 2024, during the March 2025 lows around $15, and continuing through September. All transactions were executed pursuant to 10b5-1 plans adopted in December 2023, suggesting executives' long-term confidence in company value. This insider buying becomes meaningful as recent financial performance supports their conviction. The Q2 earnings released on August 7 showed adjusted earnings per share of $0.88, beating analyst expectations of $0.75 by 17%. This also represented growth from the prior year's $0.86. The Data Solutions segment particularly stood out with 29% revenue growth, demonstrating the company's growth engine. While revenue declined 3.1% to $521.3 million year-over-year, profitability improvements drove higher earnings. Investors should note that Deluxe's valuation appears quite attractive. The current share price of $19.65 represents a 35% discount to analysts' median price target of $26.50. The forward P/E ratio of just 5.69x suggests undervaluation relative to growth prospects, while the PEG ratio of 0.47 indicates the stock is attractively priced compared to its growth rate. Additionally, the high dividend yield of 6.06% appeals to income-focused investors. However, risk factors are clearly present. The most significant concern is the high debt-to-equity ratio of 239%, with total debt reaching $1.53 billion, which could increase interest burden during rising rate environments. The current ratio of 0.94 falls below 1.0, indicating somewhat tight short-term liquidity. The dividend payout ratio of 93.75% raises sustainability questions if profitability deteriorates. From a business perspective, the Print segment's continued revenue decline poses challenges. Q1 print revenues fell 4% year-over-year, reflecting structural shifts toward digitization. However, growing segments like Data Solutions and Merchant Services are offsetting these declines, maintaining overall business portfolio stability. Looking ahead, analysts project full-year 2025 EPS of $3.42, growing to $3.73 in 2026 - representing 9% growth. Revenue is expected to stabilize and show gradual recovery from current levels. Continued Data Solutions growth and new acquisition integration effects are expected to contribute positively. In an optimistic scenario, accelerated Data Solutions growth, slower Print segment decline, and debt reduction could drive the stock toward analyst targets of $26-27. The base case scenario suggests gradual appreciation with trading in the $21-23 range. The risk scenario involves economic downturn reducing SMB customer spending or rising rates increasing debt burden. Investors should monitor key indicators: whether Data Solutions maintains 20%+ quarterly growth rates, if overall revenue establishes a bottom and begins recovering, and whether the debt-to-equity ratio declines below 200%. For dividend sustainability, it's crucial to verify that free cash flow consistently covers dividend payments. In conclusion, Deluxe presents a mixed investment profile where positive factors including consistent insider buying, earnings improvement, and attractive valuation coexist with negative factors like high leverage and revenue decline. For investors seeking the stability of a 110-year-old company with a 6% dividend yield while pursuing small-cap growth potential, this could be a consideration-worthy option.