One of the best fintech stocks in the world comes from Germany of all places | news

While much of the fintech industry has weakened in recent months, a German fintech continues to rise: die German stock exchange (WKN: 581005).

This may come as a surprise to investors, who tend to look towards the US when it comes to fintech. But a closer look at the company reveals why Deutsche Boerse is so strong in comparison.

Fintech suffers from the market environment

The upcoming payment service provider Klarna is laying off several employees. The situation is the same with prodigies PayPal (NASDAQ: AMD), where the stock price has fallen about 70% over the past 12 months. Cryptocurrencies also seem to have a slack. and Coin base (WKN: A2QP7J), the leading trading platform for digital payment methods, recently experienced brutal sales.

Fintech seems to be going out of fashion after years of hype. The corona boom is dying. Extremely high growth rates among many market participants are now being followed by an abrupt flattening that many investors did not expect. Instead, it was the expectation that was often formulated that the best providers would be able to take momentum with them into the post-pandemic period.

Finally, sustainable digitized structures have been established and many people have practiced using digital means of payment more quickly. On the other hand, the hype has also led to unhealthy excesses. Suddenly, everyone has thrown themselves into trends like “buy now, pay later” and digital image trading platforms (NFT).

It is obvious that not everyone emerges as the winner of such a competitive process. Cooling down and focusing on the essentials is good for the industry.

Therefore, Deutsche Börse can escape the trend

Deutsche Börse shares are completely unimpressed by the downturn experienced by many competitors in the fintech world. The price has been consistently rising for ten years and is currently close to the highest ever.

Chart created with YCharts. Development of Deutsche Börse share price over ten years in US dollars.

Although existing business fell by 4% in 2021, sales increased by 9%. Acquisitions contributed 7% and organically built innovations 6%. The fact that the operating profit increased proportionally despite headwinds and growth investments speaks for the strength of the business model.

Without being caught up in some hyped adventures, Deutsche Börse constantly manages to expand its range of services related to its strong core business – the operation of the Frankfurt Stock Exchange and the Eurex derivatives exchange. This includes data-driven services (data & analytics), sustainability assessments, new asset classes (eg cryptocurrencies) and the international expansion of the strong position in energy trading.

The combination of streamlining measures to further scale the platforms, targeted growth investments and acquisitions of suitable companies should ensure that Deutsche Börse can continue to grow by around 10% per year in terms of revenue and profits.

And like many software and manufacturing companies, which bring more stability to their cash flows through subscriptions and long-term services, Deutsche Boerse is working to increase the share of recurring revenue (2021: 55%). The segments in addition to Trading & Clearing are likely to contribute more than 50% of sales this year (2021: 49%). Dependence on the stock market climate is declining and the results are becoming more reliable.

Such are the chances of the Deutsche Börse share now

A price-to-sales ratio of around 9 (as of May 26) is a figure that one would otherwise tend to expect from the oligopolistic credit card companies. However, the Deutsche Börse is also very solid in the saddle. It is not only the clear market leader in Germany, but also plays a leading role in various business areas throughout Europe. In some cases, it even aspires to the top of the world.

The profit margin is correspondingly high. Net revenue of EUR 3.5 billion resulted in an impressive net profit of EUR 1.2 billion for shareholders. It is 6.59 euros per. share, and the price-earnings ratio of 25 deriving from it (as of May 26) seems much more manageable than the airy KUV.

On June 29, Deutsche Boerse will hold its big annual investor day and will certainly provide more details about its growth initiatives. Fintech Made in Germany, which you should have on your list.

Article One of the best Fintech stocks in the world comes from Germany, of all places, first appeared on The Motley Fool Germany.

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Ralf Anders does not own any of the mentioned shares. The Motley Fool owns shares in and recommends Coinbase and PayPal Holdings.

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