2 Top Growth Stocks Nobody's Talking About

When the broader market is at all-time highs, it's hard to shake the feeling that most popular stocks are expensive. That's why it's always important to take a long-term view; the further into the future you look, the less important your entry point becomes.

But with that said, investors who are willing to look beyond the hottest sectors of the market might find there's still value, particularly in certain financial stocks that currently have the economic winds at their backs. 

Payments giant Fiserv (FISV +2.08%) and vehicle-finance powerhouse Ally Financial (ALLY +1.58%) are two great examples, and they could offer portfolio-boosting growth into the new year.

Image source: Getty Images.

1. The case for Fiserv

Consumers may not have heard of Fiserv, but it indirectly serves almost 100% of U.S. households. The company provides merchant services, payment processing, and financial technologies to businesses and banks all over the globe. It's a quiet achiever that has recently delivered growth rates rivaling some of the best tech companies. 

Now more than ever, consumers are demanding instant payment services from their banking products, and Fiserv makes that happen for over 10,000 banks and financial institutions. Similarly, many online portals that facilitate internet banking are powered by Fiserv, so the company plays a critical role in the financial sector without the end user even knowing it. 

On the consumer-facing side, Fiserv is the point-of-sale (POS) solution of choice for over 6 million merchants, primarily through its Clover platform. Clover was added to the Fiserv family through the acquisition of company First Data in 2019, and it's now the fastest-growing piece of the company's merchant acceptance segment, on track to generate $196 billion in gross payment volume in 2021.

With economists predicting a booming holiday shopping season this year, that growth could be set for an acceleration. 

Data source: Fiserv. YOY = year over year.

But taking a big-picture view, if Fiserv delivers on analyst estimates of $15.4 billion in full-year 2021 revenue, it will have grown the metric by a compound annual rate of 38.5% since 2018. And with $5.57 in estimated earnings per share (EPS) this year, Fiserv's stock trades at a multiple of just 18, far cheaper than the Nasdaq 100 index at 34 times (which Fiserv is a part of). 

In October, Fiserv announced an acquisition of BentoBox, a company that provides a digital toolbox to restaurants to bolster their online presence. Clover and BentoBox are set for a suite of integrations to make the digital and in-person experiences more seamless for consumers, and it could be another tailwind for the fast-growing Clover platform. 

Image source: Getty Images.

2. The case for Ally Financial

Ally Financial is America's No.1 all-digital bank, and it's also the largest car financier in the country with an automotive loan book of over $101 billion. Vehicle prices are currently inflated as a result of supply chain issues caused by the pandemic, which is beneficial for Ally, with the company delivering record quarterly earnings-per-share results throughout 2021. 

As a result, the company's stock price has grown by 78% over the last 12 months, almost doubling the 39% return of the broad S&P 500 index over the same timeframe. 

Vehicle manufacturers expect these issues to persist in the new year, as the supply constraints of crucial components like semiconductors continue. This could mean car prices across the board will remain elevated, leading to larger loan amounts, and higher gains in off-lease remarketed vehicles for Ally.

But it's not all about the automotive segment. Ally has quietly built a mortgage business, and third-quarter originations hit an all-time high of $3.6 billion. It represented 176% year-over-year growth and 1,100% growth since the segment launched in the first quarter of 2017. The company holds a mortgage book of $16 billion, which is small, but its rapid expansion indicates it's a part of the business to watch closely.

But overall, there's no doubt Ally's earnings per share have been the key driver of share price growth. With 2021 drawing to a close, analysts expect the company's full-year earnings to nearly triple its 2020 result.

Data sources: Ally Financial, Yahoo! Finance. 

Ally Financial's stock trades at just 5.7 times forward earnings, a multiple that's 68% smaller than that of the iShares Global Financials ETF, which trades at 17.9 times. Although Ally's earnings are expected to contract slightly in 2022, they're still slated to hold firm above $7, significantly higher than both 2020 and 2019 results.

With favorable conditions set to continue in the automotive industry, investors might do well to pay more attention to this stock.