Free newsletter

Receive the most interesting news from Fintech Switzerland once a month in your inbox

The Cypriot fintech company MD Finance He released its selection of the most promising publicly traded fintech companies in the world.

These companies, selected from a pool of 200 ventures, stand out in terms of growth potential and attractiveness to investors and represent the “most attractive fintech companies for investors in 2024”, according to MD Finance.

>”/>

The 18 companies selected come from North and South America (11) and Asia-Pacific (7), with the United States being the most represented country, with a total of ten companies. South Korea and Japan follow, with two companies each. Other countries represented include Kazakhstan, India, Taiwan and Brazil, with one company each.

Fintech Snapshot: Most Attractive Fintech Companies for Investors in 2024, Source: MD Fintech, June 2024

Valuations and investor sentiment

MD Finance’s analysis reveals that the 18 companies have a median enterprise value (EV) to earnings before interest, tax, depreciation and amortization (EBITDA) ratio of 34.5. The EV/EBITDA ratio is a popular valuation multiple used to determine a company’s fair market value. It is a widely used measure to evaluate the relative value of companies, especially within the same industry.

An EV/EBITDA ratio below the industry average could suggest the company is undervalued or facing challenges. On the other hand, an EV/EBITDA ratio above the industry average could suggest that the company is overvalued or has strong growth prospects.

Bank of Montreal, from Canada; Kaspi, from Kazakhstan; and OneMain Holdings, from the United States; they have the lowest EV/EBITDA ratios of the cohort, at 19.5, 10.4, and 22, respectively. The ratios, which sit below the industry median, suggest that these companies are undervalued or facing challenges.

Bank of Montreal AND the eighth largest bank in North America by assets, providing personal, commercial and investment banking services to 13 million customers. Kaspi offers payment, marketplace and fintech solutions to 12.6 million monthly active users. Finally, OneMain Holdings provides non-primary consumers with responsible access to credit.

In contrast, nCino, Navient Corporation and Rocket Companies – all US – have the highest EV/EBITDA ratios of the group, at 274.7, 172.7 and 159.2 respectively. These numbers are well above the industry average, suggesting that these companies are overvalued or have strong growth prospects.

nCino is a cloud-based banking software provider has worked with over 1,800 financial services companies. Navient Corporation is a student loan servicer. Finally, Rocket Companies is a fintech company that provides simple, fast and reliable digital solutions for complex and qualitative transactions serve 2.5 million customers.

MD Finance’s analysis also reveals that all companies have an EV/Revenue (EV/Rev) ratio above 6 with a median of 9.4. EV/Rev is another valuation metric used to evaluate a company’s value relative to its revenue. This ratio helps investors understand how much they pay for a company’s sales, regardless of profitability.

As with the EV/EBITDA ratio, an EV/Rev ratio below the industry average could suggest that the company is undervalued or has limited potential in the eyes of investors, while an EV/Rev ratio above the industry average could suggest that the company is overvalued or that the market has confidence in the company’s ability to generate more efficiently in the future.

Bank of Montreal, Kaspi and KeyCorp, from the US, have the lowest EV/Rev ratios of the group, at 5, 5.3 and 6.3 respectively. These ratios are below the industry median, making these companies undervalued or witnessing slow revenue growth.

KeyCorp is a bank holding company offering a range of retail and commercial banking services, commercial mortgage and specialty servicing, consumer financing and leasing, investment management and investment banking products and services. It holds approximately $187 billion in assets.

At the other end of the spectrum, JIO Financial Services, from India, Navient Corporation and KB Financial Group, from South Korea, have the highest EV/Rev ratios at 109.8, 47 and 34.9 respectively, suggesting overvaluation or strong revenue growth potential. .

JIO Financial Services provides financial services, including payment services and insurance brokerage boasts 439 million subscribers. KB Financial Group offers a wide range of banking and financial services and holds approximately KRW 517.8 trillion in assets under management (AUM).

KPIs and key valuation multiples of leading public fintech companies, Source: MD Fintech, June 2024

Financial performance

The analysis also shows that all 18 companies are profitable in terms of EBITDA, meaning that their core operations generate positive profits before accounting for non-operating expenses and non-cash expenses. However, it also reveals that two companies – nCino and Rocket Companies – reported negative net income of -16 million dollars and -$42 million, respectively, in 2023.

In contrast, Bank of Montreal, KB Financial Group, Kaspi and Nubank achieved the highest performances in 2023, reporting net income of $4.4 billion, $3.5 billion, $1.9 billion and 1 billion dollars.

Nubank is a Brazilian digital banking platform that serves approximately 100 million customers. The company offers credit cards, transfers and digital payments.

Other notable publicly traded fintech companies on MD Finance’s shortlist include Payonneer Global and KakaoBank. Payoneer is an American financial services company that provides online money transfers, digital payment services, and provides customers with working capital. The company reported net income of $93 million in 2023 and serves 5 million customers. KakaoBank is a South Korean financial institution specializing in mobile banking and fintech services. The bank reported net income of $321 million in 2023 and boasts 23 million customers.

Fintech stocks rebound

In the first quarter of 2024, fintech stocks continued their upward trend. The RPP Fintech Index, which tracks the performance of major fintech sectors, recorded an increase of 4% compared to its December 2023 value, a sustained growth that highlights the continued strength and expansion of the fintech sector, second to London-based corporate finance consultancy Royal Park Partners.

Among the fintech verticals covered by the RPP Fintech Index, insurtech recorded the strongest growth, increasing by a notable 61% quarter-on-quarter (QoQ). The rise in the insurtech index was largely driven by Root Insurance’s strong performance, with its share price rising nearly fivefold following the release of its “best-ever” fourth-quarter results.

Meanwhile, payments and capital markets saw more moderate growth, at 5% and 4%, respectively. In contrast, the cryptocurrency and blockchain sector slumped 16% quarter-on-quarter. However, the cryptocurrency and blockchain vertical rebounded in early 2024 and gained 3% after the launch of the first spot bitcoin exchange-traded funds garnered significant market momentum.

Fintech Verticals Breakdown, Source: Q1 2024 Fintech Market Quarterly Update, Royal Park Partners, April 2024

Featured image credit: Edited by freepik

Receive the most interesting news from Fintech Switzerland once a month in your inbox

Source