Key Points
Investors might care about growth more than anything else, but profits shouldn’t be ignored.
Valuation is another key variable to consider, even though some investors might not prioritize it as much in their decision-making process.
There are many secular trends shaping our economy and affecting various industries. But one that's particularly exciting is the intersection of financial services and technology, an area that's home to several innovative businesses.
Here's what you should look for before buying a fintech stock.
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Growth gets a lot of attention. Companies like Lemonade(NYSE: LMND), Nu Holdings(NYSE: NU), Robinhood Markets (NASDAQ: HOOD), SoFi Technologies(NASDAQ: SOFI), and Upstart(NASDAQ: UPST) shine. All five of these businesses registered at least 35% year-over-year revenue growth in 2025, with two of them posting above 50% growth.
Investors shouldn't ignore profits. More established fintech players, like Block(NYSE: XYZ) and PayPal(NASDAQ: PYPL), have excelled in this area. Jack Dorsey-led Block expects to report a 26% adjusted operating margin in 2026. PayPal raked in $5.6 billion in free cash flow in 2025 on $33.2 billion in revenue.
Valuation is another factor that can reveal the margin of safety, if any, that the market is giving investors. In fintech land, PayPal is a cheap opportunity, as its shares trade 84% below their peak (as of April 14) and now trade at a forward price-to-earnings ratio of 9.1.
When picking stocks for your portfolio, the smart approach is to incorporate all of these variables into your decision-making process. Some investors might care about growth above anything else. Others will prioritize profitability and a compelling valuation. What matters most is that you move forward with a strategy that fits your individual philosophy.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Block, Lemonade, Nu Holdings, PayPal, and Upstart. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.
