The AltFi Fintech Index: Analysts forecast strong growth for fintech stocks
Research by AltFi suggests a nascent recovery in listed fintech companies may continue into 2024, writes Daniel Lanyon
Listed fintech companies will see an average 78 per cent growth in Earnings Per Share (EPS) over the next twelve months, according to research by AltFi.
Constituents of the AltFi Fintech Index have been on something akin to a recovery in 2023, with the index up 14.3 per cent in 2023 so far, beating 94 per cent of c.12,000 mutual and exchange-traded funds (ETFs) as well as investment trusts available to UK investors. This places it in the top decile of performance for the year to date.
Throughout 2023 the index has been up as high as 47.86 per cent at the end of July when market sentiment soared on the back of an increasingly positive volley of macroeconomic data, demonstrating the strong rebound potential of listed fintech after a 58.6 per cent market crash in 2022.
But what does this mean for the future outlook of the c.60 ‘pure play’ fintech companies tracked in the AltFi Fintech Index? Will the recovery continue?
AltFi has crunched the data, with some help from Sharepad, to reveal that analysts by and large (on average) are expecting strong growth in the coming twelve months for listed fintech companies in the index.
On average, analysts forecast constituents of the AltFi Fintech Index to see Earnings Per Share (EPS) growth of 78.4 per cent over the next twelve months, suggesting the index could see further gains in the coming years.
Of the stocks we were able to gather EPS growth forecasts for, about a quarter were forecasting negative EPS growth while the rest are forecast to see growth ranging from 5.8 (PagSeguro) per cent to 451.9 per cent (Nuvei) over the next twelve months.
What is the AltFi Fintech Index?
The AltFi Fintech Index is a rules-based index established through a mixture of quantitative and qualitative metrics. All constituents are screened through a liquidity and market capitalisation-based algorithm, as well as for thematic fintech exposure based on revenue. It is denominated in US dollars and is rebalanced on a quarterly basis.
The fintech thematic exposure score is determined through an in-depth analysis of a company’s business lines via the collection of publicly available data provided by the company in regulatory filings.
These include annual reports and other stock market filings, quarterly earnings reports, investor presentations, official earnings conference call transcripts, as well as credible news sources.
Constituents are then weighted using a modified free-float market capitalisation weighting algorithm. Index values are disseminated on an intraday and end-of-day basis.
In 2023, the index has returned 14.3 per cent, putting it ahead of the S&P 500 (12.25 per cent), MSCI World Index (10.7 per cent) and the FTSE All Share (5.9 per cent) indices over the same time period.