2 growth stocks nobody talks about

0

When the broader market hits historic highs, it’s hard to shake the feeling that the most popular stocks are expensive. This is why it is always important to have a long-term vision; the further into the future you look, the less important your entry point is.

But that said, investors who are willing to look beyond the hottest sectors of the market might find that there is still value, especially in some financial stocks that are currently on the rise.

Payments giant Fiserv (NASDAQ: FISV) and automotive finance center Allied financial (NYSE: ALLY) are two great examples, and they could offer stimulating growth for the portfolio in the new year.

Image source: Getty Images.

1. The case of Fiserv

Consumers may not have heard of Fiserv, but it indirectly serves nearly 100% of US households. The company provides merchant services, payment processing and FinTech to businesses and banks around the world. It’s a low-key player that has recently seen growth rates rivaling some of the best tech companies.

Today more than ever, consumers demand instant payment services for their banking products, and Fiserv makes this possible for more than 10,000 banks and financial institutions. Likewise, many online portals that facilitate online banking are powered by Fiserv, so the business plays a vital role in the financial industry without the end user even knowing it.

On the consumer side, Fiserv is the point of sale (POS) solution of choice for more than 6 million merchants, primarily through its Clover platform. Clover was added to the Fiserv family through the acquisition of the First Data company in 2019, and is now part of the company’s fastest growing merchant acceptance segment, set to generate $ 196 billion in gross payment volume in 2021.

With economists predicting a booming holiday shopping season this year, that growth could accelerate.

Metric

Q3 2021 (YOY)

Total growth of merchant GPV

20%

GPV growth of clover

47%

Data source: Fiserv. YOY = year after year.

But taking the big picture, if Fiserv provides analysts’ estimates of $ 15.4 billion in revenue for the year 2021, it will have increased the metric by a compound annual rate of 38.5% since 2018. And with $ 5.57 in estimated earnings per share (EPS) this year, Fiserv shares are trading at a multiple of just 18, far cheaper than the Nasdaq 100 34 times index (of which Fiserv is part).

In October, Fiserv announced the acquisition of BentoBox, a company that provides a digital toolkit for restaurants to strengthen their online presence. Clover and BentoBox are built for a suite of integrations to make digital and in-person experiences more transparent for consumers, and that could be another tailwind for the rapidly growing Clover platform.

A smiling person sitting inside a new car, being handed the keys by another person.

Image source: Getty Images.

2. The case of Financière Ally

Ally Financial is America’s first fully digital bank, and it’s also the nation’s largest auto financier with an auto loan portfolio of over $ 101 billion. Vehicle prices are currently inflated due to supply chain issues caused by the pandemic, which is good for Ally, the company posting record quarterly earnings per share throughout 2021.

As a result, the company’s stock price has risen 78% over the past 12 months, nearly doubling the return to 39% off S&P 500 index over the same period.

Automakers expect these issues to persist into the new year, as supply constraints for critical components such as semiconductors persist. This could mean car prices across the board will remain high, resulting in larger loan amounts and higher earnings in non-lease remarketed vehicles for Ally.

But it’s not just the automotive segment. Ally quietly built a mortgage business, and third-quarter originations hit an all-time high of $ 3.6 billion. It represented 176% year-over-year growth and 1,100% growth since the segment launched in the first quarter of 2017. The company has a mortgage portfolio of $ 16 billion, which is small, but its rapid expansion indicates that it is part of the business. to watch closely.

But overall, there’s no question that Ally’s earnings per share have been the primary driver of the stock price growth. As 2021 draws to a close, analysts expect the company’s annual profits to almost triple from those of 2020.

Metric

2020

2021 (Estimate)

Growth

Earnings per share

$ 3.03

$ 8.51

180%

Data sources: Ally Financial, Yahoo! Finance.

Ally Financial’s stock is trading at just 5.7 times forward earnings, a multiple of 68% lower than the IShares Global Financials ETF, which is trading at 17.9 times. Although Ally’s profits are expected to contract slightly in 2022, they are still expected to stay above $ 7, which is significantly higher than results for 2020 and 2019.

With favorable conditions expected to continue in the auto industry, investors would do well to pay more attention to this title.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.

Leave A Reply

Your email address will not be published.