Despite the proliferation of digital wallets, one can hardly find a crack in Visa's (NYSE:V) and Mastercard's (NYSE:MA) business models. Apparently, people are not willing to give up on their credit and debit cards. In fact, many are ready to pay up for metal cards, which seem to be America’s latest status symbol. American Express (NYSE:AXP) and J.P. Morgan Chase are the two leading issuers of metal cards. And while the four companies mentioned thus far are very well-known, the one actually manufacturing the cards is rather obscure. Its name is CompoSecure (NASDAQ:CMPO). and it makes three of every four metal cards in the US.
The company has been public for less than three years. The stock is up by nearly 60% from its late-2022 bottom, but early investors are still underwater. While it is rarely a good idea to extrapolate the recent past into the future, we think CompoSecure can keep climbing. In addition to the rising adoption of its products, growing revenues, and high margins, there is also a promising setup on its price chart. Take a look.
The 4-hour chart above reveals a complete 5-3 Elliott Wave cycle. Its first phase was a leading diagonal, labeled 1-2-3-4-5 in wave (1/a). While in an ending diagonal all five sub-waves have a three-wave structure, in the leading variety the motives 1, 3, and 5 can be impulses. In the case of CompoSecure, wave 1 is clearly impulsive and labeled i-ii-iii-iv-v.
The second phase of the cycle is a simple A-B-C zigzag correction in wave (2/b). Wave B of (2/b) is a triangle retracement, marked a-b-c-d-e. According to the theory, once a correction is over, the larger trend resumes in the direction of the preceding motive wave. If the count above is correct, we can expect the price to head north again in wave (3/c).
Given CompoSecure ‘s leading market position and low valuation, the stock can not only exceed the top of wave (1/a) but plausibly double from here. This is why we’ve added it to our portfolio along with 17 other companies.