You are booking your flight home for Christmas. You’d like to use your reward miles for the ticket, but you need 50,000 miles and only have 42,000 in your account. To pay for the ticket outright would cost $750, and as much as you want to see the family, it is $750 …

But what if you could buy that remaining 8,000 miles for just $200 and get the ticket? Most Americans would, if they could.

From this original insight, Rob Maclean and Christopher Barn started Points International (NSDQ: PCOM). It’s an ingenious business that revolutionizes how we receive, manage and spend rewards miles and points in all types of businesses.

The dominant market leader in the loyalty rewards business, Points International makes money in various ways, but in the example above, it buys those needed miles for $160 and sells them to you for $200.

A Mega Market

Every year, North American consumers buy or are issued $48 billion of loyalty rewards (in the form of points, coupons and miles). Let’s put this number in context: It’s double Facebook’s annual revenue and equivalent to the gross domestic product of Belarus or Croatia. In other words, it’s enormous.

Our target price for this $7-a-share, soundly profitable Canadian company is $12.

The market is fragmented, and that’s the beauty of Points International’s business. The average North American family participates in 29 rewards programs, mainly in travel (airlines, hotels), personal finance (credit cards, banks) and retail (Starbucks, Panera, Macy’s, drugstores and the like). That number is up from 22 memberships per household just two years ago.

Most people have to track all those rewards separately. That means apps to manage, cards to carry and sets of usernames and passwords to remember. The hassle isn’t just on the consumer’s side, though. Each of the thousands of companies that offers—or wants to offer—a rewards program must build a transaction management system, staff a support center and constantly improve its practices to compete.

What a mess—and an opportunity. To tap the opportunity MacLean, an airline loyalty veteran, teamed up with Barn, founder of Canada’s first tech startup incubator, to remove the impediments facing both companies and consumers.

For consumers, Points International offers a site, Points.com, where a user can manage points and miles for a variety of companies with a single username, a single password and a single app for everything. So far, Points International has signed on more than 50 of the biggest rewards program operators, including most major airlines and hoteliers. The service is free for users, no matter how many memberships they have or what they do with their rewards.

For companies, Points International takes the work out of operating a rewards program, especially the more complicated elements involved in selling, transferring and redeeming rewards. Given most rewards programs work in strikingly similar ways, Points International uses the same rewards management software for each partner, which keeps costs low. Companies, in turn, save money by not having to reinvent the wheel in building their own system, and they get the benefit of upgrades and new features that Points International’s product team constantly cranks out.

Companies also receive another benefit: guaranteed revenue. In a typical contract, Points International buys a minimum number of points or miles from the partner every year at a wholesale price and can buy more if it wishes. Points International then turns around and sells these points and miles to users, say, when they are 8,000 miles shy of a free flight, as in our example.

That’s a common case considering that a full 60% of miles today are bought, not earned. As consumers, we can be predictable, and Points International has the platform and the data to present users the right offer at the right time.

Companies receive guaranteed revenue (amounting to $400 million last year); Points International generates recurring, high-­margin revenue ($296 million last year); and consumers get a cheaper flight home. It’s a strong business model, but this is just the beginning.

Just the Beginning

Let’s revisit our purchase of 8,000 miles a final time. We were happy to pay $200 for them because the alternative was a $750 flight. But United Airlines is just one of our rewards memberships. We have 28 more, all with varying balances. Wouldn’t it be great if I could buy those last 8,000 miles with my Nordstrom credit, my Marriot points or my MasterCard rewards balance?

This is where Points International is going. It is creating a single loyalty “currency,” so to speak, that can be earned and redeemed anywhere, exclusively through the company’s platform.

This move is brilliant in many ways. It takes a strong business model and makes it nearly impenetrable. If you’re a business, you’ll find out that your  rewards program on the platform becomes far more valuable than the same program off-platform. That’s because Points International offers access to 700 million loyalty rewards members so that  companies with no programs of their own can access consumers looking to spend their rewards.

As fewer loyalty dollars go unspent, everybody, consumers and companies alike, wins. In all of this, Points International is the enabler and gatekeeper, brokering transactions by buying points wholesale and selling them retail to generate predictable, high-margin revenue.

Startup Potential

Points International is a $100 million tech business with just 180 employees, no debt and little need for capital. Why on earth is it a public company?

The first reason is that the company is Canadian. The size of companies needs to be scaled to the market in which a company grew up. By Canadian standards, Points International is plenty big enough to be public. In fact, it’s the country’s seventh-largest software company and 30^th-largest tech company.

The second reason is more relevant: A public company provides managers easier access to cash. Successful tech startups burn a lot of money in the early days and then generate gobs of cash once their product hits scale.

Points International has managed its money well so far. Most companies struggle in their early days, throwing far too much cash into the business and creating bloated enterprises. Not Points International. It’s stayed lean and agile while diverting its excess cash to an aggressive share repurchase program. With the stock depressed, the company is buying shares for the equivalent of 50 cents on the dollar, creating tremendous value for long-term shareholders.

Risks and Selling

Timing plays a tremendous role in quarterly results. Points International signs big contracts with major companies such as Southwest Airlines, Hilton and Amtrak. Whether a deal closes in one quarter or the next can swing earnings wildly, as it did this month, sending shares down.

This timing is not risk. It is the nature of the business. I want Points International going after big deals, not pandering to the smoothness that Wall Street analysts like to see. Just know that results will be lumpy and the stock will react, in both directions. Over time, as with all companies, earnings and cash flow will drive the stock price.

I will primarily be watching execution. Points International is miles ahead—OK, cheap pun—of any other player in its space, but plenty of work remains to deliver on the company’s vision. Fortunately, the current business is soundly profitable, with 75% of 2015 revenue repeating under contract in 2016, and growing; revenue is up 25% since last year. The business is debt-free and capital light, and management has displayed consistent discipline in investing only in projects with a clear sight to payoff. This is the right team with the right business to go after an enormous market ripe for disruption.

Alex Pape, CFA, manages accounts that own shares of Points.com for his clients.