Discover the high return potential of three leading fintech stocks in the payment processing and consumer finance sectors

In the stock market, which is oriented towards technologies such as artificial intelligence and financial technology, identifying the main fintech stocks can be a game-changer for those seeking substantial returns. Here, we focus on the financial strengths and growth prospects of three leading companies. As the investing world evolves, these companies display impressive fundamentals that distinguish them as top contenders for any diversified portfolio. Each company demonstrates strong financial health, effective cost management, and significant market opportunity, making them compelling picks in 2024.

The first company on the list is a leading fintech in Brazil. The company has demonstrated decisive growth in terms of profitability and operational efficiency. The second is a US fintech giant known for its advanced apps and services. The company continues to excel with substantial revenue generation and a strategic focus on profitability for Bitcoin (BTC-USD exchange rate). Finally, the third company is a multifaceted financial services provider. It has achieved significant improvements in EBITDA and balance sheet strength. The company has the fundamental ability to scale profitability and maintain financial health.

StoneCo (STNE)

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StoneCo (NASDAQ: STNE) advances by providing payment processing solutions for merchants in Brazil. In the first quarter of 2024, the company achieved adjusted EBITDA of R$ 1.512 billion, up 20.8% annually and adjusted EBITDA was R$ 1,251.4 million in the first quarter of 2023. Similarly, adjusted EBITDA margin increased by 2.9 percentage points to 49%. Towards the bottom line, adjusted net income for the first quarter of 2024 was R$ 450.4 million. This is an increase of 90.4% year-on-year (YoY) compared to R$236.6 million in the first quarter of 2023 which led to an adjusted net margin of 14.6%, up 5.9 percentage points from the previous year. Indeed, the growth in net income and margins indicates that StoneCo is managing its costs effectively and optimizing its revenue.

Additionally, StoneCo’s focus on operating margin is reflected in its cost management. For example, the cost of services increased 12% year-over-year in R$810 million. This remained unchanged quarter-on-quarter (QoQ), reflecting effective cost control measures. While administrative expenses decreased 12% year-on-year and 16% QoQ.

Overall, StoneCo’s rapid growth, particularly in terms of adjusted EBITDA and revenue-optimized net income, positions it as the top fintech stock.

Block (SQ)

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To block (London share: square) is known for its Cash App and Square services. It is a dominant player in the U.S. financial technology industry. The company’s adjusted EBITDA nearly doubled year-over-year in 705 million dollarswhich shows significant operating efficiency and cost management. Adjusted operating income was $364 million, a seven-fold increase over the previous year. Indeed, this indicates strong profitability and clear cost control.

Additionally, Cash App’s gross profit was $1.26 billionmarking a 25% increase year-over-year. The app’s strong performance was driven by its various features, including Buy Now, Pay Later, Bitcoin transactions, Cash App Borrow, and Cash App Card. On the other hand, Square’s gross profit was $820 million, up 19% year-over-year. The growth was attributed to strong buy-in rates across Square’s broader ecosystem of banking software and products.

Additionally, Bitcoin-related projects have become a significant revenue stream for Block despite requiring less than 3% of the company’s resources. Bitcoin products accounted for Cash App’s fourth-largest gross profit stream, contributing 3.3% and 4.2% of Block’s gross profit in 2022 and 2023 respectively, with minimal related expenses (0.7%).

In summary, Block’s significant gains in operating advantage and profitability across various segments solidify its position among the top fintech stocks.

SoFi (SOFI)

Source: SoFi.com

SoFi (NASDAQ: SOPHIE) offers digital financial products, such as loans, banking and investment services. The company’s adjusted EBITDA for Q1 2024 was 144 million dollars, representing a 91% year-over-year increase and a 25% margin, up from 16% in the first quarter of 2023. This dramatic improvement in EBITDA indicates strong operating leverage and strong cost management. The increase in margin indicates SoFi’s ability to scale profits alongside revenue growth. Additionally, SoFi’s tangible book value increased to $4.1 billion in Q1 2024, up $608 million from the previous quarter. Tangible book value per share increased 16% sequentially to $3.92. In fact, this steady growth in tangible book value increases the value of equity and underlines the financial condition of the company.

Additionally, SoFi achieved record growth of 3 billion dollars in consumer deposits in the first quarter of 2024, selling more than $1.9 billion in loans. Robust deposit growth, with more than 90% coming from direct deposit members, increases SoFi’s liquidity and reduces its reliance on external funding. The sale of loans on favorable terms indicates strong demand for SoFi’s lending products and efficient wealth management.

Overall, SoFi’s remarkable ability to grow profitability and maintain financial health positions it among the top fintech stocks.

As of the date of publication, the responsible editor did not hold (either directly or indirectly) any position in the securities mentioned in this article.

At the time of writing, Yiannis Zourmpanos was long in SOFI. The views expressed in this article are those of the author, subject to InvestorPlace.com terms Publishing Guidelines.

Yiannis Zourmpanos is the founder of Yiazou Capital Research, a stock market research platform designed to enhance the due diligence process through in-depth company analysis.

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