Fintechs haven’t gained as much ground in Canada as they have in countries like the U.S. and China. That’s partly because of the strict financial regulation in the country and partly because the major Canadian banks have covered the market thoroughly enough not to leave enough ground for the fintechs.
Still, there are at least three top stocks from the fintech category that you may consider adding to your portfolio.
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A payment solution company
The first thing you need to know about Nuvei (TSX: NVEI) stock, not the company, is that it’s a fraction of what it used to be. At its height (Sept. 2021), the stock traded for over $170 a share. Now, it’s trading at about $20.6 a share.
One justification for this brutal 88% discount is that the company’s original price hike was triggered and sustained by the post-pandemic market optimism, especially for the tech sector. The correction has knocked the company down to a more realistic value.
The stock is also overvalued, which, combined with the discount, may not be a good sign. But the fundamentals of the company paint a different picture. Its revenue has been growing steadily quarter over quarter.
Operating and net income numbers are struggling, but considering the revenue growth, they may stabilize soon. The company is rapidly growing its geographic reach, mostly through acquisitions.
The portfolio is quite impressive as well — it has 634 different payment methods and over 150 currencies, including digital currencies.
A credit-oriented fintech
Propel Holdings (TSX: PRL) provides financial services and products, primarily open-ended lines of credit, to underserved market segments that are not fulfilled by conventional banking institutions.
The company offers these financial services under four unique brands that collectively receive over 37,000 unique applications per day (on average). This small-cap company has already given out loans of about US$1.23 billion and has helped over 600,000 people in the U.S. and Canada.
Despite strong operational performance, the stock has been struggling since its inception in Nov. 2021 and has lost about a fourth of its valuation since then. But its organic growth is also reflected in its solid finances, and the company has more than tripled its revenues in fewer than three years.
Also, while its dividends are not backed by solid history, like the dividends you get from bank stocks, they are available at an attractive 5% yield and a healthy payout ratio. The stock is also undervalued at the time of writing.
A payment solution company for workers
Payfare (TSX: PAY) was developed to take advantage of the gap that existed between the conventional salary/worker compensation solutions and the gig economy. It markets itself as an alternative banking system for gig workers that traditional banking systems may not be ideally positioned to serve. It has already landed some of the largest employers in the gig market, like Uber and Lyft.
The stock experienced powerful growth near its inception and shot up over 111% in fewer than five months. But it fell even harder than it rose and has been struggling since then.
Still, the company has experienced compelling organic growth from about 300,000 active users to over 1.1 million users in a single year, which resulted in a 57% revenue increase as well. Payfare can achieve growth in leaps and bounds by bringing some major players in the gig economy into the company fold.
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Foolish takeaway
The three fintech stocks are currently struggling, but all of them have experienced decent organic or acquisition-driven growth. Once this growth starts reflecting in the company’s financial profitability, investor optimism about these companies may grow, and their performance may experience a boost as well.
