In the stock market, which is inclined towards tech like AI and fintech, identifying top fintech stocks to buy can be a game-changer for those seeking substantial returns. Here, the focus is on three standout companies’ financial strengths and growth prospects. As the investment world evolves, these companies exhibit remarkable fundamentals that set them apart as top contenders for any diversified portfolio. Each company demonstrates robust financial health, effective cost management, and considerable market opportunities, making them compelling choices in 2024.
The first company on the list is a leading fintech in Brazil. The company has demonstrated decisive growth in profitability and operational efficiency. The second one is a US fintech giant known for its apps and advanced services. The company continues to excel with substantial revenue generation and a strategic focus on profitability for Bitcoin (BTC-USD). Finally, the third company is a multifaceted financial services provider. It has derived significant improvements in EBITDA and balance sheet strength. The company has the fundamental ability to scale profitability and maintain financial health.
StoneCo (STNE)
StoneCo (NASDAQ: STNE) edges on by providing payment processing solutions for merchants in Brazil. In Q1 2024, the company derived an adjusted EBITDA of R$1.512 billion, up 20.8% annually, and the adjusted EBITDA was R$1,251.4 million in Q1 2023. Similarly, the adjusted EBITDA margin increased by 2.9 percentage points to 49%. Towards the bottom line, the adjusted net income for Q1 2024 was R$450.4 million. This is a 90.4% year-over-year (YoY) boost from R$236.6 million in Q1 2023 that led to an adjusted net margin of 14.6%, up 5.9 percentage points from the previous year. Indeed, the growth in net income and margins points to StoneCo’s sharply managing its costs and optimizing its top-line.
Moreover, StoneCo’s focus on operational edge is reflected in its cost management. For instance, the cost of services increased by 12% YoY to R$810 million. This remained flat quarter-over-quarter (QoQ), reflecting effective cost control measures. Whereas, administrative expenses decreased by 12% YoY and 16% QoQ.
Overall, StoneCo’s rapid growth, particularly in adjusted EBITDA and net income with revenue optimization, makes it a top mark among fintech stocks.
Block (SQ)
Block (NYSE: SQ) is known for its Cash App and Square services. It is a dominant player in the US financial technology space. The company’s adjusted EBITDA nearly doubled YoY to $705 million, showcasing significant operational efficiency and cost management. The adjusted operating income was $364 million, a sevenfold increase YoY. Indeed, this indicates strong profitability and sharp cost control.
Moreover, Cash App’s gross profit was $1.26 billion, marking a 25% YoY increase. The app’s solid performance was driven by its various features, including Buy Now Pay Later, Bitcoin transactions, Cash App Borrow, and Cash App Card. On the other hand, Square’s gross profit was $820 million, up 19% YoY. The growth was attributed to solid attachment rates to Square’s broader ecosystem of software and banking products.
Further, Bitcoin-related projects have become a significant profit stream for Block despite requiring less than 3% of the company’s resources. Bitcoin products accounted for Cash App’s fourth largest gross profit stream, contributing 3.3% and 4.2% of Block’s gross profit in 2022 and 2023, respectively, with minimal related expenses (0.7%).
To summarize, Block’s substantial gains in operational edge and profitability across various segments solidify its position among top fintech stocks.
SoFi (SOFI)
SoFi (NASDAQ: SOFI) offers financial products digitally, like loans, banking, and investment services. The company’s adjusted EBITDA for Q1 2024 was $144 million, representing a 91% YoY boost and a margin of 25%, up from 16% in Q1 2023. This massive improvement in EBITDA indicates solid operating leverage and sharp cost management. The margin increase points to SoFi’s ability to scale bottom-line alongside top-line growth. Further, SoFi’s tangible book value increased to $4.1 billion in Q1 2024, up by $608 million from the prior quarter. The tangible book value per share rose 16% sequentially to $3.92. Indeed, this constant growth in tangible book value enhances equity value and underscores the company’s financial standing.
Moreover, SoFi attained a record growth of $3 billion in consumer deposits in Q1 2024, selling over $1.9 billion in loans. The robust deposit growth, with over 90% coming from direct deposit members, enhances SoFi’s liquidity and reduces reliance on external funding. The successful sale of loans at favorable terms indicates strong demand for SoFi’s loan products and efficient asset management.
Overall, SoFi’s substantial ability to scale profitability and maintain financial health makes it a standout on the top fintech stocks list.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
As of this writing, Yiannis Zourmpanos held a long position in SOFI. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
