This Canadian Stock Could Be the Future of Global Payments

MOGO stock does look more speculative, but could be a huge opportunity for patient investors.

Key Points
  • Mogo seeks approval to offer stocks and crypto in one app, exploring stablecoin payments, with WonderFi exposure and a $50 million Bitcoin allocation.
  • Recent results show rising revenue and record AUM with positive adjusted EBITDA, but operating margins are negative and profits came largely from investment revaluations.
  • This is a speculative, high-beta stock with regulatory uncertainty; valuation looks low, but consider watching until debt declines and sustainable profitability improves.

Canadian investors may often forget about an essential sector amongst the finance industry. Sure, we have banks and insurance and the like, yet payments is a huge opportunity – one that remains under the radar after initial excitement wears off. That’s why today, we’re going to look at MOGO (TSX:MOGO), a payments stock that could be the future of global payments. Let’s look into why.

money goes up and down in balance

Source: Getty Images

A different payments platform

There’s one thing that investors can look at that differentiates MOGO from the rest, and that’s crypto. MOGO stock continues to seek regulatory approval to become one of only two regulated Canadian platforms offering both equities and crypto trading in one app. This would give it a rare foothold in a heavily regulated space. It would join companies like Robinhood that have successfully leveraged growth.

Right now, MOGO stock continues to explore stablecoin rails for cross-border flows. This could lower friction and costs in international transactions. Furthermore, if executed well, MOGO stock could be a bridge between traditional payments and decentralized finance. For now, the board approved the allocation of up to $50 million in Bitcoin. While risky, it’s also branding, integrating Bitcoin into its capital base.

Then there’s its WonderFi deal. This gave MOGO stock a one-time boost, sure. Yet more importantly, it validates the consolidation of crypto and equities platforms. Now, MOGO can monetize its WonderFi stake. And management clearly believes in that future, with 7% of shares repurchased since 2022 through buybacks.

Is value there?

That’s the big question. To find out whether MOGO stock offers value to the everyday investor, we need to look at recent earnings. The second quarter was strong, with wealth revenue up 48% year-over-year and payments revenue up 23%. Assets under management (AUM) hit a record $462 million, up 18%.

This was while also expanding its gross margin by 72%. Furthermore, adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) hit $1.9 million with a profit margin of 11.4%. Now the stock has $50.8 million in cash/securities/investments, with a reasonable $83 million in debt. While a debt-to-equity (D/E) ratio of 102% is higher for a company chasing profitability, it shows how focused the stock is on growth.

Meanwhile, value is strong. The stock trades at 0.77 times book value, 0.9 times sales, and 16.6 times earnings. Investors interested in this stock will need to continue watching earnings, especially as net income of $13.5 million came mainly from investment revaluations, not operations. In fact, its operating margin is still negative. What’s more, crypto approval isn’t guaranteed. With a beta over 4, shares can swing wildly. So it might merely be a stock to watch at this point.

Bottom line

MOGO stock isn’t the company that’s going to help you sleep at night. Yet it could be the one you tell your friends about. The key will be to buy at the right time. While it could be the future of global payments, that future hasn’t been realized quite yet. It’s now a speculative growth play at the intersection of fintech and crypto. The potential upside is significant, but the risks are real. Therefore, investors will want to keep this stock on their watchlist. At least until debt goes down, and profit comes up.

Fool contributor Amy Legate-Wolfe has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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