The 3 Most Undervalued Fintech Stocks to Buy in February 2023
All three undervalued fintech stocks to buy in February 2023 are up substantially relative to the S&P 500. As a result, all three should continue outperforming the index throughout the year.
Usually, when I select stocks to buy from a specific industry or group well represented by the exchange-traded fund community, I’ll pick companies from a popular fund. The largest fintech ETF by net assets is the ARK Fintech Innovation ETF (NYSEARCA:ARKF), with $659.4 million. This is an actively managed fund from Cathie Wood. It currently has 29 stocks. Unfortunately, none of my three undervalued fintech stocks made her cut.
The Global X FinTech ETF (NASDAQ:FINX) has $472.4 million in net assets across 66 holdings. All three of my picks missed the cut a second time.
You don’t need to worry, though. The names on this short list of undervalued fintech stocks are all well-run businesses with plenty of growth ahead on both the top and bottom lines. They range from $2 billion in market capitalization to nearly $20 billion. They’re listed in order of how confident I am about you making money from each of them over the long haul.
| SIVB | SVB Financial Group | $323.21 |
| WEX | Wex | $188.41 |
| BFH | Bread Financial Holdings | $42.79 |
SVB Financial (SIVB)
SVB Financial Group (NASDAQ:SIVB) is a diversified financial services company with four operating segments: Silicon Valley Bank, SVB Capital, SVB Private and SVB Securities. The company, which was named one of America’s best banks by Forbes, helps innovators and entrepreneurs grow their businesses by providing banking products and services.
With $212 billion in assets, a $74 billion loan portfolio, and $342 billion in client funds under administration and management, SVB Financial is likely to catch investors’ eye when they move back into tech stocks with some confidence.
SVB Financial has been my favorite bank stock for years. It’s down 46% over the past 52 weeks. However, it’s come to life in 2023, gaining more than 40% year to date and 29% since the company reported its fourth-quarter and full-year results on Jan. 19.
Profits were considerably lower in the quarter, with net income of $275 million compared to $371 million a year ago and $429 million in Q3 2022. However, it reported that its client base started to do a little better financially, offering hope for the future. Moreover, its period-end loans were $74.3 billion, 2.9% higher than the previous quarter. And non-GAAP core fee income of $349 million was 10.4% higher than in the third quarter.
Shares trade at a price-to-book ratio of 1.6, well below their five-year average of 2.5.
WEX (WEX)
WEX (NYSE:WEX) likes to say that it is “the global commerce platform that simplifies the business of running a business.” It offers fleet cards, fuel management, B2B payments, benefits administration, and many other solutions through its robust platform. The company’s growth strategy revolves around winning new customers, growing its existing clients’ use of its products and services, adding to its offerings, expanding geographically and making strategic acquisitions.
In late November, Wex announced that it had launched the WEX Motorpass Driver App in Australia. The app allows fleet vehicle drivers and employees in construction, retail, manufacturing and other industries to find the best available fuel prices near them in real time.
“The WEX Motorpass Driver App ensures these businesses, and their drivers, can always find the most cost effective price available. The revenue saved can be used by business owners for multiple purposes, including investment for growth or back into the business,” stated the company’s Nov. 28 press release.
So, while fleet cards are a big part of its fleet solutions operating segment, its products and services go well beyond a credit card.
More than 80% of the company’s revenue is recurring. In the first nine months of 2022, despite $136.5 million in impairment charges, its adjusted operating income was $697 million, 44% higher than in 2021.
Trading at just 16.2 times trailing 12-month free cash flow of $508 million and 3.8 times sales, the stock is more than reasonably priced for a long-term buy.
Bread Financial Holdings (BFH)
If you’re a New York Yankees fan, you might want to give Bread Financial Holdings (NYSE:BFH) a closer look. On Jan. 26, the payment, lending and saving solutions provider announced a co-brand New York Yankees Mastercard that will hit the diamond just before the 2023 Major League Baseball season gets underway.
With this credit card, users get 5% cash back on all purchases at Yankee Stadium, 3% back on dining, gas, rideshare and transit, and 1% back on any other purchases. Indicative of Bread Financial’s tech-forward approach to its business, attendees will be able to enter the stadium, scan a QR code to sign up for the card and use it from their digital wallet while at the game. It’s a win-win for Yankees fans.
In March 2022, the parent of Bread Financial changed its name from Alliance Data Systems to Bread Financial Holdings to assume the identity of Bread, the $450 million digital payments company Alliance acquired in 2020.
In 2022, the company’s revenue increased by 17% to $3.83 billion. Its pre-tax pre-provision earnings were $1.89 billion in 2022, up 19% from a year earlier. Its pre-tax pre-provision earnings have now increased by double digits YOY in seven consecutive quarters.
By every financial metric, BFH stock is cheaper today than it’s been in the past five years. So it’s a long-term buy for aggressive investors.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
