Based on key financial metrics such as the price-to-sales ratio, shareholder yield and the price-earnings ratio, the following 3 stocks made the list for top value stocks in the Fintech industry. Those looking for value stocks to add to their portfolio may want to use this list as a starting point for further investment research.

Why Focus on Undervalued Fintech Stocks?

Value investors seek to buy stocks at a discount to their intrinsic value. Long-term returns show that such strategies are advantageous. Value stocks, as a group, tend to outperform growth stocks over extended periods of time. Typically, value investors perform financial analysis of numerous metrics, don’t follow the herd and are long-term investors.

AAII’s A+ Investor Value Grade is derived from a stock’s Value Score. The Value Score is the percentile rank of the average of the percentile ranks of the price-to-sales ratio, price-earnings ratio, enterprise-value-to-EBITDA (EV/EBITDA) ratio, shareholder yield, price-to-book-value ratio and price-to-free-cash-flow ratio. The score is variable, meaning it can consider all six ratios or, should any of the six ratios not be valid, the remaining ratios that are valid. To be assigned a Value Score, stocks must have a valid (non-null) ratio and corresponding ranking for at least two of the six valuation ratios.

What Goes Into AAII’s Value Grade?

Stock evaluation requires access to huge amounts of data as well as the knowledge and time to sift through it all, make sense of financial ratios, read income statements and analyze recent stock movement. AAII created A+ Investor, a robust data suite that condenses data research in an actionable and customizable way suitable for investors of all knowledge levels, to help investors with that task.

AAII’s proprietary stock grades come with A+ Investor. These offer intuitive A–F grades for more than just value. It is possible for a stock to appear cheap based on one valuation metric but appear expensive on another. It is also possible for one valuation ratio to be associated with outperforming stocks during certain periods of time but not others. Some stocks may even have null values for certain metrics like the price-earnings ratio or the price-to-book ratio but not others. An example of this would be a company with losses instead of profits or a negative book value because of heavy borrowing. Negative earnings or book value result in non-meaningful ratios that are left blank or null.

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3 Undervalued Fintech Stocks

Of course, there are countless value stocks that are worth mentioning, but this is a concise list of the top 3 undervalued stocks in the Fintech industry for Thursday, May 16, 2024. Let’s take a closer look at their individual scores to see how they measure up against each other and the Fintech industry median.

The Value Grade is assigned based on how each stock’s composite valuation compares to all other stocks.

The process for assigning grades starts with each variable for a given stock. The percentile rankings for all valid ratios that a stock has are calculated. So, for instance, a stock could have a price-to-book ranking in the 43rd percentile, a price-earnings ranking in the 67th percentile, a price-to-sales ranking in the 23rd percentile, etc. Then, those rankings are averaged for each stock. (A minimum of two valid variables are required, though all six will be used if available.)

Once the average of the individual variables is calculated, that average is ranked against all stocks. Put another way, each stock’s composite valuation is compared to all other stocks. These ranks are then sorted into quintiles from the cheapest 20% (a grade of A) to the most expensive 20% (a grade of F).

As always, we recommend that you conduct proper due diligence and research before investing in any security. We also suggest that investors utilize numerous grades, not just value, when it comes to deciding whether a company is a good fit for their allocation needs.

NCR Atleos Corp’s Value Grade

Value Grade:

NCR Atleos Corporation is a financial technology company providing self-directed banking solutions to a global customer base, including financial institutions, merchants, manufacturers, retailers and consumers. The Company's solutions enable the acceleration of self-directed banking through ATM and interactive teller machine (ITM) technology, including software, services, hardware and its Allpoint network. The Company manages its operations in three segments: Self-Service Banking, Payments & Network, and Telecommunications and Technology (T&T;). Self-Service Banking offers solutions that include a comprehensive line of ATM hardware and software, and related installation, maintenance, and managed and professional services. Payments & Network offers access to its Allpoint retail-based ATM network. T&T; offers managed network and infrastructure services to enterprise clients across all industries via direct relationships with communications service providers and technology manufacturers.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

NCR Atleos Corp has a Value Score of 62, which is considered to be undervalued.

When you look at NCR Atleos Corp’s price-to-sales ratio at 0.45 compared to the industry median at 2.43, this company has a lower price relative to revenue compared to its peers. This could make NCR Atleos Corp’s stock more attractive for value investors.

Now, let’s assess NCR Atleos Corp’s EV/EBITDA ratio, also known as enterprise multiple. At 5.7, when compared to the industry median of 12.2, the company may be considered undervalued in relation to its peers. Value investors could use the enterprise multiple to identify stocks that are considered overvalued or undervalued relative to their industry.

Shareholder yield is the sum of a stock’s dividend yield (paid over previous 12 months minus special dividends) and the percentage of net share buybacks over the previous 12 months. NCR Atleos Corp’s shareholder yield is lower than its industry median ratio of (0.95%). Value investors may look for an attractive shareholder yield because it can be a powerful tool for identifying if the company has a good management team.

As one of the most common value metrics, the price-to-book ratio evaluates a company’s current market price relative to its book value. NCR Atleos Corp’s price-to-book ratio is higher than its industry median ratio of 2.51. This could make NCR Atleos Corp less attractive to investors looking for a new addition to their portfolio.

Lastly, let’s take a look at NCR Atleos Corp’s price-to-free-cash-flow ratio (P/FCF), which can indicate a company’s market value relative to its operating cash flow. NCR Atleos Corp’s price-to-free-cash-flow ratio is lower than its industry median ratio of 14.70. This could make NCR Atleos Corp more attractive because the lower P/FCF ratio indicates that NCR Atleos Corp is undervalued. The P/FCF ratio metric can also be viewed over a long-term time frame to see if the company's cash flow to share price value is generally improving or worsening.

Paysafe Ltd’s Value Grade

Value Grade:

Paysafe Limited is a United Kingdom-based payments platform provider. The Company's integrated payments platform offers the full spectrum of payment solutions ranging from credit and debit card processing to digital wallet, eCash and real-time banking solutions. Its segments include Merchant Solutions and Digital Wallets. Merchant Solutions segment markets merchant solutions under the Paysafe and Petroleum Card Services brands. These solutions include a full range of PCI-compliant payment acceptance and transaction processing solutions for merchants and integrated service providers including merchant acquiring, transaction processing, and fraud and risk management tools. Digital Wallets segment is the combination of its legacy Digital Wallet and eCash solutions and services markets in Europe, United Kingdom, North America and Latin America. It also provides digital commerce solutions for specialized industry verticals, including iGaming, gaming, digital goods and cryptocurrencies.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

Paysafe Ltd has a Value Score of 86, which is considered to be undervalued.

Paysafe Ltd’s price-to-book ratio is higher than its peers. This could make Paysafe Ltd less attractive for value investors when compared to the industry median at 2.51.

You can read more about Paysafe Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

StoneCo Ltd’s Value Grade

Value Grade:

StoneCo Ltd. is a provider of financial technology and software solutions. The Company has designed its cloud-based technology platform, namely the Stone Business Model, for its clients to connect, get paid and grow their businesses. The Company’s segments include financial services and software. In financial services, it offers payments, digital banking and credit solutions, focused mainly on micro, small and medium businesses (MSMBs). In software, it offers point of sale (POS) and enterprise resource planning (ERP) solutions for different retail and service verticals, customer relationship management (CRM), engagement tools, e-commerce and Omnichannel solutions, among others. It also provides digital product enhancements to help its merchants improve their consumers’ experience, such as its split-payment processing, multi-payment processing, recurring payments for subscriptions, and one-click buy functionality. It provides its clients with store, life and health insurance solutions.

Stocks with a Value Score from 81 to 100 are considered deep value, those with a score between 61 and 80 are value and so on.

StoneCo Ltd has a Value Score of 70, which is considered to be undervalued.

StoneCo Ltd’s price-earnings ratio is 14.2 compared to the industry median at 67.0. This means that it has a lower price relative to its earnings compared to its peers. This makes StoneCo Ltd more attractive for value investors.

StoneCo Ltd’s price-to-book ratio is higher than its peers. This could make StoneCo Ltd less attractive for value investors when compared to the industry median at 2.51.

You can read more about StoneCo Ltd’s key financial metrics like shareholder yield, price-to-free-cash-flow and EV/EBITDA ratio, or learn more about its Momentum and Growth Grades, by subscribing to A+ Investor.

Other Fintech Stock Grades

Value is just one of the five Stock Grades included in our A+ Investor service. AAII members can see the top-graded stocks—those with grades of A or B for value, growth, momentum, earnings estimate revisions and quality—on the A+ Stock Grades Screener.

Also, if you want full access to all of AAII’s premium services, you can subscribe to one convenient bundled plan called AAII Platinum where you can try out A+ Investor, AAII Dividend Investing, the Stock Superstars Report, Growth Investing and VMQ Stocks. With the other premium services, you can dive deep into additional metrics, portfolios, commentary and information about Fintech stocks as well as other industrys.

Choosing Which of the 3 Best Fintech Stocks Is Right for You

Choosing which value stocks to invest in will ultimately depend on your individual goals and allocation; however, comparing similar value stocks in the same industry can help you analyze which might be better investments for you in the long run. So, let’s take a look at the Value Grade for all of our stocks.

• NCR Atleos Corp stock has a Value Grade of B.
• Paysafe Ltd stock has a Value Grade of A.
• StoneCo Ltd stock has a Value Grade of B.

Now that you have a bit more background about each of the 3 undervalued stocks in the Fintech industry as well as their overall grades, it’s time for you to conduct additional research to see if these could fit your portfolio needs based on your goals and risk tolerance. AAII can help you figure out both and identify which investments align with what works best for you.

We do so through a program of education that teaches you to invest for yourself and become an effective manager of your own wealth—no more relying on others for your financial independence. You can rely on AAII for timeless articles on financial planning and stock-picking, unbiased research and actionable analysis that makes you a better investor.

A+ Investor adds to that qualitative teaching by giving you a powerful data suite that helps you whittle down investment decisions to find stocks, exchange-traded funds (ETFs) or mutual funds that meet your needs.

Additional Resources About Fintech Stocks

Want to learn more about Fintech stocks to see if they could be the right investment for you? Check out some additional resources and articles to help you on your financial journey.

• 3 Undervalued Fintech Stocks for Thursday, May 16
• Which Is a Better Investment, Fidelity National Information Servcs Inc or StoneCo Ltd Stock?
• Which Is a Better Investment, Rocket Companies Inc or StoneCo Ltd Stock?
• What You Need to Know About StoneCo Ltd's Q1 Earnings

AAII Disclaimer

We make no representations or warranties that any investor will, or is likely to, achieve profits similar to those shown, because past, hypothetical or simulated performance is not necessarily indicative of future results. Before making an investment decision, you should consider your circumstances and whether the information on our content is applicable to your situation. This information was prepared in good faith and we accept no liability for any errors or omissions. The full disclaimer can be read here.