1 Incredibly Cheap Fintech Stock to Buy Now

Look around you. Digital trends are shaping the economy. A strong area of ​​note was the rise of fintech businesses.

The blending of financial services and technology has spawned many businesses that attract investors looking for exposure to rapid growth. However, there is a clear leader in this sub-sector that has already proven its worth and is trading at a bargain price.

Here’s an incredibly cheap one fintech stock to buy right now.

Positive trends

Investors should consider adding PayPal (PYPL 0.03%) to their portfolios. Shares of the e-payments leader are currently trading 79% off their July 2021 peak as the market grew disenchanted with slower growth.

But I think those worries are a bit overblown. PayPal posted 8% year-over-year revenue growth in the second quarter (ended June 30), which is still very healthy. This was driven by total payment volume (TPV) growing by 11% to $417 billion and the number of transactions increasing by 8%.

PayPal will continue to benefit from the prevalence of cashless transactions. This is a strong tailwind that increases convenience and security for consumers and merchants. There is still a long way to go to steal shares from cash and other paper payment methods.

One way PayPal will drive growth is by introducing new features, something CEO Alex Chriss, who has been in the role for less than a year, is focusing on. For example, earlier this year the company introduced one-click Fastlane Checkout and Smart Receipts, a tool that allows merchants to offer referrals and offer rewards.

This seems to help engagement. In the past 12 months, the average user has transacted almost 61 times using PayPal, up 11% from Q2 2023. This figure has been steadily increasing in recent years.

You wouldn’t be able to tell by looking at the stock’s terrible performance, but PayPal faces minimal financial risk. It is consistently profitable, something that cannot be said for many fintech ventures.

The balance sheet should help shareholders sleep well at night. Yes, PayPal has $12.2 billion in debt on its balance sheet. However, this was more than offset by $18.3 billion of cash, cash equivalents and investments.

Keeping perspective

Related to PayPal’s slower growth, the market may also be concerned about the hyper-competitive nature of the payments industry. In recent years, its popularity is hard to ignore Apple Payment. The budding digital wallet is a top payment option for iPhone users worldwide, a very lucrative consumer group to target.

On the merchant side, PayPal’s Braintree, which has grown POS rapidly, is not immune to competition. He has to fight people like Adyen and Stripe, for example.

But to its credit, PayPal’s massive, two-sided platform benefits network effects. As of June 30, there were 429 million active accounts, made up of both merchants and consumers, using the service. As the user base expands, it immediately becomes more valuable to all stakeholders.

This is an incredibly cheap stock. It trades at a forward price-to-earnings ratio of 15.1. Investors will struggle to find growth companies that have competitive advantages and are financially sound, such as this one, selling at such a low valuation multiple.

I mentioned before that PayPal is extremely profitable. It generates large amounts of free cash flow, an estimated $6 billion in 2024. In a smart move, management is aggressively using this revenue to buy back shares. This is a clear indication of their view that the stock is cheap right now.

Knowing more about PayPal should make the average investor want to own this business.