Jack Henry & Associates, an IBD 50 leader and fintech stock, is rising for its fifth week in a row as shares approach a buy point.
The little-known fintech stock, which was founded in 1976, provides core information-processing solutions for banks and credit unions. Jack Henry & Associates provides the back-end system that processes daily banking transactions and posts updates to accounts and other financial records.
The firm offers three core banking platforms: Silver Lake, CIF 20/20 and Episys. Over 400 banks use Silver Lake, with assets ranging from $500 million to $50 billion. CIF 20/20 is used by 360 banks with $3 billion in assets or less; it is the most cost-efficient solution for banks with up to 200 users. Finally, Episys is used by the vast majority of credit unions, with assets ranging from $3 million to $25 billion.
99% Retention Rate A Huge Plus For This Fintech Stock
Essentially, Jack Henry's core banking services are the nuts and bolts of systems managing deposits, ATMs, loans and daily transactions. The firm boasts close to a 99% retention rate among its customers. Its users become very reluctant to change providers as this would involve learning new technology, retraining employees and high upfront costs.
The firm expanded its revenue from $1.39 billion in 2017 to $1.76 billion in 2021. Over that same time, EPS rose from $3.14 to $4.12. Both annual revenue and earnings per share continued to climb each year, even amid the Covid-19 pandemic.
Analysts expect earnings to keep rising next year, growing 17% to $4.84 for 2022 and an additional 9% the following year. Average year-over-year earnings growth has reached 26.5% over the past four quarters.
Jack Henry Stock Builds Cup Base
The stock began building a cup base in early April. Shares then crossed below the 50-day line and 21-day exponential moving average as the stock sold off alongside the market. The fintech stock attempted to reclaim these moving averages in June but was turned away at resistance.
Finally, in early July, the stock broke above these lines and reclaimed them as support. Jack Henry rose more than 2% on Tuesday and is quickly approaching a 205.47 buy point of its current cup base, according to MarketSmith chart analysis.
The fintech stock's relative strength line also hit a new high on the weekly chart, a great sign ahead of the potential breakout.
A few possible concerns for this stock include the weaker-than-average volume in the most recent weeks. Ideally, we want to see a stock rising in stronger volume leading up to the breakout.
Another concern is the fintech stock's industry group rank. The financial computer software industry group isn't a high-ranking group. It currently holds the No. 146 spot among IBD's 197 groups.
