Before getting into financial technology or fintech stocks, a little story might help. There’s a popular pizza joint in my neck of the woods. These folks are from New York and I think they know people so I’m going to be diplomatic. While the pie is awesome, the problem is that the company – which has been in business since 1997 – is cash only.
Delivery? Fuggedaboutit! An app to take your order? Are you serious? You pick up the phone and dial and maybe someone will pick up. If not, I guess you’re going to have to walk up to the counter. About the only convenience in this place is that it offers an ATM inside. That’s it.
Now, these folks might get away with such a business model. But that’s not going to fly with new businesses. As the Brookings Institution stated, cash will soon be obsolete. Consumers are demanding more digitalized conveniences, not less. So, unless you have a brilliant recipe for authentic New York-style pizza, you better check out these fintech stocks.
PayPal (PYPL)
One of the powerhouses among fintech stocks, PayPal (NASDAQ:PYPL) reached a peak valuation in 2021. However, since then, PYPL stock has cratered due to a combination of factors, including unfavorable monetary policy. However, certain positive developments – including a better-than-expected jobless claims print – may bode well for overall consumer sentiment.
For investors seeking a deal, PYPL stock may appear intriguing. Right now, shares trade hands at 2.17X trailing-year revenue. That’s below what was seen during the first quarter of this year when the metric stood at 2.49X. Overall, in the past year, the ratio landed at 2.32X. Therefore, by a reversion to the mean, PYPL may expand into its former valuation.
Analysts are modeling fiscal 2024 sales to hit $31.93 billion. If so, that would imply a growth rate of 14.8% from the prior year. In 2025, experts believe that revenue may reach $34.4 billion. The high-side view stands at $35.12 billion.
Assuming a shares outstanding count of 1.02 billion, PYPL stock is trading at a modest 1.87X next year’s most-optimistic sales forecast. This is one of the finctech stocks to watch.
Paysafe (PSFE)
Based in the U.K., Paysafe (NYSE:PSFE) provides end-to-end payment solutions in multiple international markets. Its payment platform provides a range of solutions such as credit and debit card processing, digital wallets, eCash and real-time banking services for certain entertainment verticals. These include iGaming, online betting and retail and hospitality-related applications.
At this moment, PSFE stock trades at only 0.71X trailing-year revenue. That’s low compared to other players in the infrastructure software space, which runs an average multiple of 4.14X. Admittedly, Paysafe’s price-to-sales ratio is hotter than the prior year’s average metric of 0.5X. Still, there’s a lot of potential for growth.
In fiscal 2024, analysts are modeling for revenue to land at $1.71 billion. If so, that would entail a lift of 6.6% from the prior year’s tally of $1.6 billion. In the following year, sales could rise to $1.83 billion. As well, the high-side view calls for $1.92 billion.
Assuming a shares outstanding count of 60.77 million, PSFE trades at 0.62X projected high-side 2025 sales. That’s really cheap considering the company’s forward potential. It’s one of the fintech stocks to consider.
ACI Worldwide (ACIW)
Another player in the infrastructure software space, ACI Worldwide (NASDAQ:ACIW) develops, markets, installs and supports a range of software products and solutions for facilitating digital payments. In addition to the processing of credit, debit and prepaid card transactions, ACI is also involved in the fields of digital innovation and fraud prevention.
Now, the difference between ACIW stock and other rivals in the ecosystem is valuation. Right now, shares trade hands at 3.21X sales. That’s a hot premium compared to many of its competitors. However, it’s still lower than the sector average, making it undervalued. That said, in the past year, the metric averaged 2.39X.
Still, patient investors may have a deal with ACIW stock. Analysts are modeling for revenue of $1.58 billion by year’s end. If so, that would translate to a growth rate of 10.7% from last year’s print of $1.43 billion. And in fiscal 2025, sales could rise again by 7.3% to $1.69 billion. The high-side view calls for $1.72 billion.
Assuming a shares outstanding count of 104.66 million, ACIW stock is trading at 2.82X high-side 2025 revenue. It’s at least one of the fintech stocks to investigate.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
