Fears of rising inflation and a possible recession resulted in a massive stock market sell-off over the past few months, prompting fintech stocks to plunge significantly. However, the industry has enormous growth potential owing to rapid technological advancements and rising demand for digital transactions.
Furthermore, a growing number of collaborations between national regulators and financial institutions, as well as the use of contemporary technology by numerous financial organizations to deliver integrated and value-added services to clients, are important drivers of the fintech sector.
The global fintech market is expected to reach $16652680 million by 2028, registering a CAGR of 13.9%.
Given this backdrop, we think it could be wise to scoop up the shares of fundamentally sound fintech companies Visa Inc. (V) and Regional Management Corp. (RM) and capitalize on the growing industry trend.
Visa Inc. (V)
V is a global payments technology company. The company enables digital payments between customers, merchants, financial institutions, corporations, strategic partners, and government entities.
V's net revenues increased 18.7% from the year-ago value to $7.28 billion for the third quarter ended June 30, 2022. Its operating income grew 2.1% year-over-year to $4.15 billion. The company's net income surged 32.5% from the prior-year quarter to $3.41 billion, while its EPS amounted to $1.60.
Analysts expect the EPS to increase 21.3% year-over-year to $7.17 in fiscal 2022. The consensus revenue estimate of $29.02 billion in fiscal 2022 represents a 20.4% increase from the same period last year. The stock has gained 8.4% over the past year.
V's POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
V also rated B for Stability, Quality, and Sentiment. Within the Consumer Financial Services industry, it is ranked #8 of 48 stocks. Click here to see additional POWR Ratings for Value, Momentum, and Growth for V.
Regional Management Corp. (RM)
RM, a diversified consumer finance firm, offers a wide range of installment loan products primarily to clients in the United States who have limited access to consumer credit from banks, thrifts, credit card companies, and other lenders. It provides small and big installment loans, as well as retail loans to help with the purchase of furniture, appliances, and other retail items.
In June, With the inauguration of its first branch in Merrillville, RM announced the expansion of its operations to Indiana, its 15th U.S. state. The new position strengthens Regional Management's de novo foothold in the Midwestern United States. "We are very pleased to bring to Indiana our suite of affordable financial solutions for hard-working Hoosiers," said Robert W. Beck, President and Chief Executive Officer of RM.
For the first quarter ended March 31, 2022, RM's total revenue increased 23.7% from the year-ago value to $120.85 million. Its cash and cash equivalents grew 144% year-over-year to $17.64 million. The company's net income surged 4.9% from the prior-year quarter to $26.78 million, while its EPS rose 15.6% year-over-year to $2.67.
RM’s EPS is expected to grow at the rate of 24% per annum over the next five years. The consensus revenue estimate of $504.01 million in fiscal 2022 represents a 17.7% increase from the same period last year. The stock has gained 7.8% over the past year.
It is no surprise that RM has an overall B rating, which equates to Buy in our POWR Ratings system. The stock also has a B grade for Stability, Value, and Quality. Within the Consumer Financial Services industry, it is ranked #2.
Beyond the POWR Ratings grades I have just highlighted, you can view RM ratings for Momentum, Growth, and Sentiment.
V shares fell $2.91 (-1.37%) in premarket trading Monday. Year-to-date, V has declined -3.14%, versus a -13.15% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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