The past couple of years have been an uphill battle for fintech stocks. Despite strong underlying business performance, most names in the space have lagged the broader market’s recovery. However, the tide may soon be turning in favor of these beaten-down disruptors. Monetary policy looks destined to shift in short order. And when it does, wise investors will start to build positions in fintech stocks.
Indeed, I believe now presents an opportune time to buy into quality fintech companies. The next round of rate cuts provides a volume catalyst. And once banks become more amenable to partnering with these innovators, we could see a flood of pent-up demand unleashed. Plus, a rise in online transactions and lending activity is likely. This surge will allow many fintech stocks to regain their former highs. In the case of these companies below, I think the potential is there for triple-digit upside.
Flywire Corporation (FLYW)
Flywire Corporation (NASDAQ:FLYW) is a global payments enablement and software company that combines its proprietary global payments network, next-gen payments platform, and vertical-specific software to facilitate complex payments for clients and their customers in the education, healthcare, travel, and B2B sectors.
Now, FLYW stock doesn’t have the prettiest chart. It is down 29% over the past two years, and while it did begin a recovery rally in 2023, that rally ended in the third quarter. So, this fintech company is clearly one of the more volatile fintech plays.
However, I still think this stock holds a lot of promise in the long-run. Flywire is growing faster than most other fintech companies. Analysts expect the company’s earnings per share to rise from 47 cents in 2024 to $1.78 in 2027, along with a doubling of revenue from $500 million to more than $1 billion over that period.
Thus, the stock’s current decline does not bother me that much at all. Flywire’s cash flow and net margins have seen noteworthy expansions. Traction in the education vertical was strong in Q4, implying future revenue growth in FY 2024. The company also had a net recurring revenue of 125%, which means existing clients are very sticky, and Flywire can drive a lot of growth going forward. That’s a business model I think is worth investing in.
Dlocal Limited (DLO)
DLocal Limited (NASDAQ:DLO) is a fintech company that provides global cross-border payment solutions. It simplifies and democratizes payments in emerging markets, connecting global merchants to local payment methods. Its technology platform, One dLocal, enables businesses to get paid (pay-in) and make payments (pay-out) online safely and efficiently. The company is based in Uruguay and conducts its business in many developing countries.
Unfortunately, this stock’s performance has also been lackluster. DLO stock has been basically flat over the past year and a half, but I soon believe that the company’s valuation will eventually catch up to its intrinsic growth. The company’s balance sheet is very clean, as Dlocal has 82 times more cash than debt and very good profitability. The company ended 2023 with a 23% net margin, better than 93% of its software peers, while revenue growth averaged 82% annually for the past three years. That’s better than 97% of software companies.
Analysts expect significant growth moving forward, with revenue expected to grow from $889 million to $1.5 billion from 2024 to 2026. Dlocal’s earnings per share are expected to almost double from 61 cents to $1.18 during that period. Paying just 26-times forward earnings seems like a steal with that much growth ahead, and a stable balance sheet.
StoneCo Ltd. (STNE)
StoneCo (NASDAQ:STNE) is a Brazilian fintech company that provides an end-to-end, cloud-based technology platform for merchants to conduct electronic commerce across in-store, online, and mobile channels. The company helps clients connect, facilitate transactions, receive payments, and grow their businesses. StoneCo primarily targets small- and medium-sized businesses.
This is another fintech stock based in South America that is very cheap. It trades at just 12-times forward earnings, with earnings that are expected to double over the next three years. That profitability boost is expected to be accompanied by accelerating revenue growth. StoneCo’s top line is expected to balloon from $2.6 billion to $4.1 billion over the same time frame.
However, while this stock is inexpensive, it does have $1.14 billion in debt against a similar amount of cash. This still means the company’s balance sheet remains quite clean, and in fact, interest rate cuts in Brazil could turn that debt into an upside catalyst. Over the long-term, I think this stock could be a multi-bagger.
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On the date of publication, Omor Ibne Ehsan 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 writer, subject to the InvestorPlace.com Publishing Guidelines.
