Many companies suffered business reversals and some closures during the global pandemic. However, the pandemic-induced lockdowns and social-distancing measures intensified the popularity of Canadian e-commerce company Shopify (TSX:SHOP). The stock became a sensation in 2020, and Canada’s technology sector suddenly had a face.
The phenomenal rise started five years ago when global e-commerce won over merchants and customers. Shopify delivered back-to-back returns of over 184% in 2019 and 2020. In May 2020, the tech darling dethroned Royal Bank of Canada as the most valuable TSX company by market capitalization.
Unfortunately, Shopify’s growth story is history in 2024 because the virus-fueled catalysts are gone. The current share price of $86.82 is 93.7% lower than at year-end 2021. Also, SHOP is down 15.84% year to date. Today, an under-the-radar TSX stock could be the next Shopify.
Online fintech
Propel Holdings (TSX:PRL) is not an e-commerce platform but an online financial technology company. Its market cap of $822.2 million is considerably smaller than the $111.7 billion of Shopify. However, PRL’s trailing one-year price return is +249.64% compared to Shopify’s -0.16%. At $23.85 per share, the year-to-date gain is 86.94%.
This fintech boasts a proprietary online lending platform and caters to Canadian and U.S. clients, particularly those without access to credit. Propel’s credit products include installment loans and lines of credit. It also offers analytics, marketing, and loan servicing services.
The consumer lender has been operating since 2011 and takes pride in its artificial intelligence (AI) and underwriting capabilities today. Before I forget, unlike Shopify, Propel Holdings is a dividend payer. If you invest today, the dividend yield is 2.17%.
Record results
Propel Holdings’s record results in the first quarter (Q1) 2024 reflect in the stock’s performance. In the three months ended March 31, 2024, revenue and net income climbed 47% and 77% to US$96.5 million and US$13.1 million compared to Q1 2023. The board approved an 8% dividend hike, the fourth increase since the start of 2023.
“We have had an exceptionally strong start to the year and are proud to deliver another quarter of record results, including record revenue, adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization), net income, adjusted net income and ending combined loan and advanced balances (CLAB),” said its chief executive officer Clive Kinross.
Tremendous growth opportunity
According to management, it was Propel’s strongest first quarter in history. Strong consumer demand led to record numbers. Kinross added that the AI-powered technology platform helped achieve stellar performance. Moreover, the Q1 2024 results are at par, if not better than the full-year 2023 results.
In 2023, revenue and net income increased 54% and 68% year over year to US$96 million and US$8.5 million, respectively. The underwriting platform processed over 164,000 loans and lines of credit last year.
Kinross sees tremendous opportunity for business growth in 2024. He expects the underserved consumers of traditional financial institutions and lenders to grow. He said the solid start for 2024 indicates these people’s economic health and resilience.
Red-hot stock
Propel Holdings’s business thrives and is profitable. This fintech could be a red-hot stock like Shopify before. The difference is that it won’t rely on external factors like coronavirus to drive growth. Overlooked borrowers are the growth catalysts.
