3 Fintech stocks under the radar with 200% upside potential
Sometimes, when it comes to investing, under-the-radar stocks are a much better option than very famous names. For example, few have heard of Modern (NASDAQ:MRNA) before the coronavirus pandemic or even in the early days of the pandemic. However, MRNA stock turned out to be a fantastic investment for those who bought it in the first half of 2020. In fact, the investors who bought the company’s stock made much more money than those who bought the most well-known pharmaceutical stocks. Accordingly, with the most famous fintech names such as PayPal (NASDAQ:PYPL) and Block (SNEEZE:SQ) is struggling mightily, buying under-the-radar fintech stocks looks like a very good strategy for those looking to gain exposure to the sector.
Another indicator that this strategy can be effective comes from none other than Berkshire Hathaways (SNEEZE:BRK.B) Warren Buffett. His holding company recently bought an under-the-radar fintech stock not too long ago.
Specifically, in February, Berkshire Hathaway bought $1 billion of the shares in Now Holding (SNEEZE:NOW). In December, before Nu’s IPO, Buffett spent $500 million on shares in the company.
Read on to learn more about Nu and two other under-the-radar fintech stocks that could jump 200% over the next four years.
| NOW | Now Holdings | $4.12 |
| PCTY | Paylocity | $216.49 |
| FLT | FleetCor Technologies | $167.26 |
Nu Holdings (NU)
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Founded in 2013, Now Holdings (SNEEZE:NOW) has brought digital banking services to the Latin American countries of Brazil (home market), Mexico and Colombia. Over 66 million of its roughly 70 million customers are in Brazil, so it has plenty of room to expand in Latin America.
In fact, Nu is already growing very quickly, as revenue rose a whopping 230% year-over-year in Q2, excluding currency fluctuations. It’s also very encouraging that the company’s cash from operations jumped to $464 million in Q2, versus its negative cash flow from operations of $51 million in the year-ago period. In addition, Nu generated $78.3 million in cash from operations in Q1, versus negative cash. cash flow from operations of $222.7 million during Q1 2021. Clearly, Nu’s cash flows are moving quickly in the right direction.
In addition, Bank of America (SNEEZE:BAC) analyst Mario Perry on September 9 significantly increased the 2023 bottom line estimate for Nu. Specifically, he raised his estimate for 2023 earnings per share to $261 million from $115 million. The analyst reported that the company has gained more users than he had previously expected, while financing costs have fallen amid the company’s belt-tightening.
Paylocity (PCTY)
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Paylocity (NASDAQ:PCTY) provides companies with software that simplifies payroll, workforce and HR functions.
In June, KeyBanc analyst Jason Celino assumed coverage of the shares with an outperform rating. The analyst expects the company to benefit from the continuation of the work-at-home phenomenon, as the trend has prompted firms to look for ways to stay connected with their workers while making them more efficient. Moreover, the analyst believes that Paylocity can gain market share going forward.
In the second quarter, Paylocity’s revenue rose 37% year over year to $229 million. On the bottom line, the company generated earnings per share of 80 cents, well above analysts’ average estimate of 53 cents.
“Our products focused on the modern workforce have all seen a significant increase in utilization,” said Paylocity co-CEO Steve Beauchamp.
On average, analysts expect the company’s EPS to rise to $4.23 this year from $3.25 last year. The average EPS estimate for 2023 is currently $4.58.
FleetCor Technologies (FLT)
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FleetCor (SNEEZE:FLT) “provides digital payment solutions for businesses to control purchases and make payments.” The products, among other features, automate accounts payable functions, enable businesses to easily make payments to foreign entities, and enable companies to control the use of company funds by their employees.
Impressively, FleetCor announced in August that the oil giant BP (SNEEZE:BP) had renewed use of FleetCor’s “commercial fleet card program.”
In July, Barclaypp (SNEEZE:BCS) analyst Ramsey El-Assal predicted that Fleetcor would benefit from higher gas prices and pent-up travel demand. The analyst maintained an “overweight” rating on the stock.
Proving analyst predictions right, FleetCor’s Q2 revenue rose 29% year-over-year to $861 million, beating analysts’ average outlook by $40 million. Meanwhile, Q2 EPS, excluding certain items, came in at $4.17, beating analysts’ average outlook by 28 cents.
Analysts’ average 2022 EPS estimate for the company is $15.97, compared to the $13.21 EPS the company reported for 2021. Next year, the average estimate calls for FleetCor’s EPS to jump to $17.46.
The FLT share has a very low forward price earnings of 9.7.
As of the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to the InvestorPlace.com Publishing Guidelines.
