Money is a critical medium of exchange that allows people to buy goods and services. Consumers look for ways to save money, make more of it, and have their money compound over time. Many fintech firms offer services that align with what consumers want.
You can put your money into a high-yield savings account if you want a decent return with very little risk. Investors can also buy stocks and other assets through a firm’s brokerage accounts. Speaking of investors, they can choose from many fintech stocks. However, these undervalued fintech stocks show plenty of promise.
Nu Holdings (NU)
Nu Holdings (NYSE:NU) trades at a price-to-earnings ration of 46x and has a $57 billion market cap. The digital bank offers various financial products and services. While the bank caters to global customers, most of its customers are in Latin America.
Nu Holdings’ focus on the growing region translated into impressive gains. The stock has gained 72% over the past year and attracted Warren Buffett’s attention. The Oracle of Omaha has a Nu Holdings position in the Berkshire Hathaway (NYSE:BRK-A,)(NYSE:BRK-B) portfolio.
Beyond Buffett’s interest, the stock’s recent gains, and a large presence in Latin America, the bank has plenty to offer. Revenue increased by 69% year-over-year to $2.7 billion in the first quarter. Net income soared to $378.8 million, which was a 167% year-over-year increase.
Nu Holdings ended up with a 29.7% net profit margin, and a rising user base suggests its profits will continue to grow. A 26% year-over-year increase in the total number of customers suggests that financial growth is here to stay.
Visa (V)
Visa (NYSE:V) is a leading credit and debit card company that makes money from every transaction. The company regularly logs net profit margins above 50% and delivers solid returns for long-term investors.
Shares are up by 5% year-to-date and have gained 60% over the past five years. Investors get a 0.7% yield and an impressive dividend growth history. The annualized growth rate currently stands at 18% over the past decade.
The fintech firm continued its momentum with 10% year-over-year revenue and net income growth in the second quarter of fiscal 2024. Cross-border volume increased by 16% year-over-year while overall payments volume was up by 8% year-over-year.
Wall Street analysts are feeling optimistic about the fintech stock. The average price target for the stock suggests a 16% upside. The stock only has four “hold” ratings while the other 21 analysts rated the stock as a “buy.” The highest price target of $345 per share implies that Visa stock can jump by an additional 26% from current levels.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) has been testing long-term investors for years. The premise is solid. SoFi is an online bank that is gaining a lot of attention and has recently become profitable. Despite the potential, its stock is down by 34% over the past five years. Investors jumped the gun in 2021 and paid for it. Even now, shares are down by 29% year-to-date.
SoFi’s latest financial results suggest that long-term optimism makes sense. Revenue grew by 37% year-over-year while the company generated $88 million in net income. That’s compared to a $34.4 million net loss in the same period last year.
Management expects full-year GAAP net income to range from $165 million to $175 million. That’s significantly above the recent guidance of $95 million to $105 million. The midpoint of the new guidance is $170 million compared to a $7.3 billion market cap. That translates into a P/E ration of 43x.
SoFi stock is getting cheaper, and its rapidly expanding profit margins should lead to appreciation for long-term investors. Just don’t expect massive gains this year. SoFi seems like a multi-year growth story that can be compelling for investors with lengthy time horizons.
On this date of publication, Marc Guberti held a long position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
