This stock is overlooked but has significant long-term potential.
Identifying growth stocks at reasonable prices can be quite challenging these days. Many popular investments have skyrocketed to levels that might leave shareholders disappointed in the coming years. Yet, not every stock fits this mold. Some growth stocks exhibit solid long-term promise, strong management teams, and aren’t trading at astronomical prices.
Generously Global (rely 0.64%) is one such option. This undiscovered financial service, GEM, stands to offer substantial benefits to investors as it aims to transform the international remittance market. Here’s why it might be one of the best growth stocks you can purchase for $1,000 right now.
Lower costs for sending money
REMITLY leverages digital technology and smartphones to tackle common issues for consumers globally, specifically the high costs associated with international remittances. Traditional banks impose flat fees for overseas transfers, often leaving users burdened by hefty amounts, while platforms like Western Union apply steep charges as a percentage of the total transaction. With a user-friendly mobile app, Remitly disrupts the money transfer landscape by offering lower fees for sending funds back home.
By focusing on a comprehensive service on both sides of the transaction, it has quickly gained traction, particularly among those sending money from the U.S. to countries like India and Mexico. The company is currently expanding its applications for transferring money worldwide. Anyone sending remittances is likely looking for more affordable options, which should help boost its adoption in various markets and increase revenues over the next few years.
In the latest quarter, Remitly reported a year-on-year revenue increase of 34% to $362 million, with transmission volumes climbing 41% from last year. The company is currently experiencing profitability, posting a net profit of $11.4 million for that period. A substantial part of its future growth is attributed to revenue from non-North American remittance corridors, which has surged nearly 100% year-on-year, reaching $322 million in the past 12 months.
Are stablecoins a risk?
If remittances are on the rise, it may seem puzzling that the stock has dropped 30% from its highs earlier this year. One of the reasons could be the confusion surrounding Stablecoins. Circle Group has recently faced challenges with new regulations tied to its IPO and scrutiny from the U.S. government. While Stablecoins are intended to simplify financial transfers, they require a platform for users to send these coins abroad. Contrary to some beliefs, they don’t come with zero fees. REMITLY has the potential to become a go-to platform for Stablecoin transfers as international remittance practices evolve.
Another concern for investors is a proposed remittance tax from the U.S. government. There’s a bill suggesting a 3.5% tax on outbound remittances, which could deter people from sending money overseas. Whether or not this will significantly impact users remains to be seen, but my hunch is that a relatively low tax rate won’t prevent people from supporting their families back home.
Why Remitly Global is a solid buy
There’s quite a bit of buzz surrounding Remitly’s stock price. Some investors may interpret this as a reason to exit consumer finance technology. To me, that’s exactly why now is the time to consider investing in this stock.
With a market cap of $4 billion, it’s an appealing option for long-term investors. Annual revenue, which stands at $1.36 billion, could realistically reach $2 billion or even $3 billion within the next five years. It’s one of the fastest-growing companies in its field, boasting a 34% increase from the previous year.
Additionally, it enjoys impressive unit economics with a margin of 60%. If this scales up successfully, it could yield a net income margin of over 20%. With revenues of $3 billion, a 20% margin translates to a profit of $600 million, leading to a forward price-to-earnings ratio of just 5 based on its current market cap. This presents an attractive growth stock opportunity that could offer remarkable returns for those who invest today and hold on for years to come.
