Fintech companies have derived outsized gains to investors in the last few years. The COVID-19 pandemic also acted as a tailwind for fintech enterprises as demand for digital products and services accelerated since March 2020. Moreover, several growth stocks have lost momentum in the last two months allowing you to buy the dip.
Let’s see why these three fintech companies can keep beating the broader market in 2022 and beyond, making them top buys at current prices.
One of the largest payment processing companies globally, Visa (NYSE: V) has gained over 800% in the last decade. However, it’s up by just 3% in the previous year and trading 12% below all-time highs. Last year, e-commerce giant Amazon disclosed its intention to ban Visa on its platform due to high transaction fees, dragging the stock of the payments processor lower.
In fiscal 2021 that ended in September, Visa increased payments volume by 16% year over year. Comparatively, revenue and net income rose by 10% and 13%, respectively, in fiscal 2021.
Valued at a market cap of $478 billion, Visa is forecast to increase sales by 17.2% to $28.26 billion in fiscal 2022 and by 14.2% to $32.28 billion in fiscal 2023. Its adjusted earnings per share are also estimated to rise from $5.91 in 2020 to $8.42 in 2022.
The long-term drivers for Visa remain solid as the company will benefit from the global shift towards cashless payments over time.
Since its IPO in 2015, PayPal’s (NASDAQ: PYPL) stock has gained over 400%., valuing the company at a market cap of $226 billion. Despite its stellar gains, PayPal is also down 37% from all-time highs.
In Q3 of 2021, the company processed $1.2 trillion in total payment volume, increasing 26% year over year. It ended the quarter with 416 million accounts, allowing the
company to grow its revenue by 25% year over year.
PayPal continues to report robust profit margins, and in the last 12-months, its operating margin stands at 18%. The company generates around $5 billion in free cash flows each year, and its adjusted earnings are forecast to grow at an annual rate of 20.4% in the next five years. An improving bottom-line provides PayPal with the flexibility to reinvest resources into its business, improve shareholder returns via buybacks and dividends, or fund acquisitions.
The final fintech company on my list is Block (NYSE: SQ), formerly known as Square. It went public in late 2015, and shares have returned a monstrous 1,000% in just over six years. But SQ stock is also down 49% from record highs, making it the ultimate contrarian bet for growth investors.
Block initially gained massive traction after processing billions of dollars in payments for small and medium enterprises in the last few years. Block has recently expanded its suite of products by launching the Cash App that executes peer-to-peer payments on a real-time basis and allows users to buy and sell Bitcoin.
Its sales have almost tripled from $3.3 billion in 2018 to $9.5 billion in 2020. Analysts expect sales to rise by 85% to $17.6 billion in 2021, valuing it at a price to sales multiple of 5x, which is quite reasonable.
Contributing Writer at MyWallSt
Aditya took an interest in the stock market during the financial crash of 2008-09. His favorite stocks include Roku and Apple as both companies enjoy a leadership position in their respective verticals and are poised to beat the broader markets consistently going forward.