Over the past six months, Flywire has been a great trade, beating the S&P 500 by 16.8%. Its stock price has climbed to $14.78, representing a healthy 29.6% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Flywire, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is Flywire Not Exciting?
Despite the momentum, we're cautious about Flywire. Here are three reasons we avoid FLYW and a stock we'd rather own.
1. Low Gross Margin Reveals Weak Structural Profitability
For software companies like Flywire, gross profit tells us how much money remains after paying for the base cost of products and services (typically servers, licenses, and certain personnel). These costs are usually low as a percentage of revenue, explaining why software is more lucrative than other sectors.
Flywire’s gross margin is substantially worse than most software businesses, signaling it has relatively high infrastructure costs compared to asset-lite businesses like ServiceNow. As you can see below, it averaged a 61.3% gross margin over the last year. Said differently, Flywire had to pay a chunky $38.73 to its service providers for every $100 in revenue.
The market not only cares about gross margin levels but also how they change over time because expansion creates firepower for profitability and free cash generation. Flywire has seen gross margins improve by 1 percentage points over the last 2 year, which is slightly better than average for software.
2. Long Payback Periods Delay Returns
The customer acquisition cost (CAC) payback period measures the months a company needs to recoup the money spent on acquiring a new customer. This metric helps assess how quickly a business can break even on its sales and marketing investments.
Flywire’s recent customer acquisition efforts haven’t yielded returns as its CAC payback period was negative this quarter, meaning its incremental sales and marketing investments outpaced its revenue. The company’s inefficiency indicates it operates in a competitive market and must continue investing to grow.
3. Operating Margin Rising, Profits Up
Many software businesses adjust their profits for stock-based compensation (SBC), but we prioritize GAAP operating margin because SBC is a real expense used to attract and retain engineering and sales talent. This is one of the best measures of profitability because it shows how much money a company takes home after developing, marketing, and selling its products.
Analyzing the trend in its profitability, Flywire’s operating margin rose by 3.7 percentage points over the last two years, as its sales growth gave it operating leverage. Its operating margin for the trailing 12 months was 1.2%.
Final Judgment
Flywire’s business quality ultimately falls short of our standards. With its shares outperforming the market lately, the stock trades at 2.8× forward price-to-sales (or $14.78 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d suggest looking at our favorite semiconductor picks and shovels play.
Stocks We Would Buy Instead of Flywire
The market’s up big this year - but there’s a catch. Just 4 stocks account for half the S&P 500’s entire gain. That kind of concentration makes investors nervous, and for good reason. While everyone piles into the same crowded names, smart investors are hunting quality where no one’s looking - and paying a fraction of the price. Check out the high-quality names we’ve flagged in our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 244% over the last five years (as of June 30, 2025).
Stocks that have made our list include now familiar names such as Nvidia (+1,326% between June 2020 and June 2025) as well as under-the-radar businesses like the once-small-cap company Comfort Systems (+782% five-year return). Find your next big winner with StockStory today.
