Flywire has gotten torched over the last six months - since January 2025, its stock price has dropped 41.7% to $11.71 per share. This might have investors contemplating their next move.
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.
Why Is Flywire Not Exciting?
Despite the more favorable entry price, we're sitting this one out for now. Here are three reasons why FLYW doesn't excite us 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 63.6% gross margin over the last year. Said differently, Flywire had to pay a chunky $36.44 to its service providers for every $100 in revenue. 
2. Long Payback Periods Delay Returns
The customer acquisition cost (CAC) payback period represents the months required to recover the cost of acquiring a new customer. Essentially, it’s the break-even point for sales and marketing investments. A shorter CAC payback period is ideal, as it implies better returns on investment and business scalability.
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 Losses Sound the Alarms
While many software businesses point investors to their adjusted profits, which exclude stock-based compensation (SBC), we prefer GAAP operating margin because SBC is a legitimate expense used to attract and retain talent. This metric shows how much revenue remains after accounting for all core expenses – everything from the cost of goods sold to sales and R&D.
Flywire’s expensive cost structure has contributed to an average operating margin of negative 2.4% over the last year. Unprofitable, high-growth software companies require extra attention because they spend heaps of money to capture market share. As seen in its fast historical revenue growth, this strategy seems to have worked so far, but it’s unclear what would happen if Flywire reeled back its investments. Wall Street seems to be optimistic about its growth, but we have some doubts.
Final Judgment
Flywire isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 2.4× forward price-to-sales (or $11.71 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.
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