Is Green Dot Corporation (GDOT) Cheap Based on the NetSpend Holdings Inc (NTSP) Buyout?

Clearly Green Dot lacks the momentum, but the company does offer a solid revenue base of around $550 million. It had nearly 4.37 million active cards at the end of 2012 or nearly double that of NetSpend. Earnings are also expected to exceed $1.10 for 2013 and the company has a rock solid balance sheet with nearly $200 million in unencumbered cash.

Any similar valuation offered to Green Dot would provide a triple to investors. Unfortunately this valuation difference likely made a deal impossible to reach. An acquirer such as TSYS wouldn’t be willing to pay up while the investors at Green Dot couldn’t accept a small premium if huge potential still exists.

Conclusion

With the small gain on Wednesday, investors clearly do not see a lot of opportunity in a leading prepaid debit card provider. The company is very profitable and has a fantastic balance sheet, but it clearly needs some help getting beyond the reduction of exclusivity at Wal-Mart.

If Green Dot can hit a homerun with the mobile bank, GoBank, this stock could be a huge winner especially if corporations remain willing to pay up for stocks in the sector.

The article Is Green Dot Cheap Based on the NetSpend Buyout? originally appeared on Fool.com and is written by Mark Holder.

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