In this article, we will be taking a look at the 5 most promising fintech stocks to buy. To read our detailed analysis of the fintech sector, you can go directly to see the 12 Most Promising Fintech Stocks To Buy.
5. Intuit Inc. (NASDAQ:INTU)
Upside Potential as of February 22: 22.51%
Average Price Target: $480.36
Number of Hedge Fund Holders: 92
Intuit Inc. (NASDAQ:INTU) is an application software company providing financial management and compliance products and services. It is based in Mountain View, California.
Josh Beck at KeyBanc holds an Overweight rating on Intuit Inc. (NASDAQ:INTU) shares as of January 4. The analyst also raised his price target on the stock from $400 to $425.
Intuit Inc. (NASDAQ:INTU) has been growing its customer base over the past few years, and with its shift to the online ecosystem, analysts now forecast a customer growth of 11.9%, reaching 12.6 million by 2027. The company’s online ecosystem has a five-year average growth of 39.4%.
There were 92 hedge funds long Intuit Inc. (NASDAQ:INTU) at the end of the fourth quarter. Their total stake value was $5.6 billion.
Fundsmith, an investment management company based in London, mentioned Intuit Inc. (NASDAQ:INTU) in its 2022 yearly investor letter. Here’s what the firm said:
“Take the example of Microsoft and Intuit Inc. (NASDAQ:INTU). Microsoft shares are currently being valued at a P/E ratio of 25.0 times the consensus EPS estimate for the fiscal year ending June 2023. Meanwhile, Intuit is being valued at 28.4 times the non-GAAP consensus estimate for the fiscal year ending July 2023. Many investors and analysts may accept that Intuit is trading at a higher multiple given expectations of greater growth potential. However, Intuit removes share-based compensation from their non-GAAP EPS whereas Microsoft does not. Given that Intuit’s GAAP EPS guidance for the year ending 31st July 2023 is $6.92–$7.22, its non-GAAP guidance is $13.59–$13.89, and the consensus estimate for 2023 EPS is at $13.69, it seems clear that most sell-side analysts are accepting the company’s non-GAAP adjustments, which includes the removal of some $1.8bn of share-based compensation, in their estimates. If we include the impact of share-based compensation in Intuit’s 2023 EPS to make a more apples-to-apples comparison with Microsoft based upon GAAP EPS, Intuit’s 2023 EPS would be closer to $9, meaning that the shares would be trading at a multiple of about 43 times. I think investors and analysts may find a premium of 14% for Intuit over Microsoft (28.4 times versus 25.0 times) to be reasonable. I’m not so sure they are fully aware that Intuit shares are actually trading at a premium of 73% if share-based compensation is treated in the same manner between the two companies.
Many investors and analysts, including us, look to cash flow metrics more than accrual profits. Unfortunately, share-based compensation may cause distortions in cash flow metrics as well, even when they follow GAAP. Under GAAP, share-based compensation is added back in the cash flow from operating activities, which in turn is used in the computation of free cash flow. ..” (Click here to read the full text)
