Innovation and agility are the competitive advantages and strength of financial technology companies. In Canada, fintech stocks are fast-rising and could be the next best big thing as these companies seize opportunities to develop and expand offerings. The areas include customer service, financial advice, payment, and lending and risk management, among others.
Goeasy Ltd (TSX: GSY), Propel Holdings (TSX: PRL), and Payfare (TSX: PAY) are better performers than the established financial institutions, including Big Banks, this year. All three have market-beating returns and are likely to be winning investments in 2023.
Solid growth potential
Goeasy provides non-prime loans and lease-to-own products through popular offerings such as easyfinancial, easyhome, and LendCare. The $1.9 billion fintech is an alternative to traditional lenders or banks. Despite the heftier share price than peers, current investors enjoy a 12.8% year-to-date gain.
This non-prime consumer lender produced impressive results in the second quarter and first half of 2023. In Q2 2023, loan originations reached a record $667 million that raised the loan portfolio to $210 million. Goeasy’s forecast is only up to $200 million.
The net income for the quarter rose 45% to $55.6 million versus Q2 2022. In the first half of 2023, the bottom line jumped 66% year over year to $107 million. Goeasy achieved several milestones, including 88 consecutive quarters of positive income.
Its President and CEO, Jason Mullins, said the quarterly results highlight the growth potential of the business model and strength of goeasy’s credit performance. If you’re not price-conscious, the fintech stock trades at $116.68 per share but pays a decent 3.37% dividend.
Building opportunities
Propel Holdings placed 199th in the recent business ranking of Canada’s top growing companies due to its 234% three-year growth rate. The $275.3 million company serves or facilitates access to credit for consumers underserved by traditional financial intuitions.
According to its CEO, Clive Kinross, Propel Holdings builds opportunities for consumers neglected by the credit market. He adds the company incorporates the best of finance and AI-driven technology to build real solutions for millions of everyday consumers.
In Q2 2023, revenue increased 33% to $71.7 million versus Q2 2022, a new company record, while net income soared 183% year over year to $5.7 million. On a year-to-date basis, the 123% year-over-year increase to $13.1 million represents record performance for the six months ending the second quarter.
At $8.02 per share (+11.69% year to date), Propel pays a juicy 5.05% dividend.
Growing gig economy
Payfare continues to shine and deliver enormous returns to investors. At $5.20 per share, the year-to-date gain is 21.2%. It provides digital banking and instant payment solutions to the next-generation workers and fuels the gig economy. This $248.2 million fintech also formed partnerships with leading gig platforms such as Uber, Lyft, and DoorDash.
Market analysts are bullish since Payfare reported $2.1 million in net income and a record $46.5 million in revenue in Q2 2023. Their 12-month average price target is $11.67, a 124% return potential. Management said, “Our business development pipeline remains active with opportunities in the gig economy.”
Superior returns
Investors can’t underestimate small-cap stocks like goeasy, Propel Holdings, and Payfare. All three have outperformed the Big Bank stocks amid a challenging operating environment. The fintech stocks are well-positioned to deliver superior returns when economic conditions return to normal.
