Upstart Holdings (NASDAQ:UPST) and Intuit (NASDAQ:INTU) both help consumers get their finances right, but do it in two different ways. Upstart examines credit risk for borrowers using alternative methods, qualifying them for more competitive rates. Intuit has products like TurboTax, Mint, and Credit Karma that provide different services to assist managing customers' finances. The two companies have radically different market caps, as Intuit is seven times bigger at $170 billion versus Upstart at $25 billion.

Intuit: The industry standard

Keithen Drury (Intuit): After creating QuickBooks -- accounting software geared toward small and medium-sized businesses -- in 1983, Intuit has acquired multiple businesses instead of building them. It bought TurboTax in 1993 and Mint.com in 2009. Inuit's spending spree continued with purchasing Credit Karma for $4.7 billion in 2020 and Mailchimp for $12 billion in 2021.

Two people celebrate while looking over documents.

Image source: Getty Images.

All these actions are part of Inuit's five big bets to be an "AI-driven expert platform." Intuit is focusing on two groups: individuals and small businesses. For individuals, Intuit is connecting them with experts and giving them the tools they need to make the best financial decisions possible. Intuit is becoming the "center of small business growth" as well as bridging the gap between expensive enterprise and starter software.

After it closed out its 2021 fiscal year in July, Inuit's revenue increased $2 billion over fiscal 2020, resulting in 25% growth. For a company generating almost $10 billion in sales, that kind of growth is impressive. About 15% of the quarterly revenue was derived from Credit Karma. Pulling it out of the fiscal year results in revenue growth of 14%. For fiscal 2022, Intuit issued revenue growth almost equal to 2021's result: 15% to 16%. Credit Karma is expected to be a huge part of the growth, as its projected revenue increase is nearly 60%. 

Intuit trades at a hefty 82 price-to-earnings (P/E) ratio, but it drops to 47 when 2022 projected earnings are used. While this price still isn't cheap, it's similar to Adobe, which also trades at 47 times earnings.

Intuit's products are the industry standard; TurboTax and QuickBooks rule their respective product categories. Intuit must stay agile and innovate to maintain usage. Otherwise a new company may pop up and disrupt it, much like Upstart is doing with the Fair Isaac (or FICO) score.

Altogether, Intuit is a solid buy and provides investors with continual growth without a lot of downside risk. It even pays a small dividend to reward shareholders owning the stock. Don't expect eye-popping returns with Intuit, but market-beating results are within its grasp.

Upstart: A major innovator

Jamie Louko (Upstart): The majority of loan decisions today are based on FICO credit scores, but one company has started seeing massive adoption -- and it doesn't focus on the credit score. Upstart is trying to revolutionize credit by using data points (that aren't based on an arbitrary score that is ineffective) to determine creditworthiness. With FICO, a consumer might not get access to good credit because of one past slip-up, but Upstart understands that not everybody is perfect and is trying to fix this problem. 

Upstart has seen massive adoption by banks for its determinations. Its third-quarter revenue -- which it just reported on Nov. 9 -- jumped 250% to $228 million compared to the year-ago quarter, potentially driven by a transaction volume increase of 244% to $3.13 billion from its partners. The company earned $29 million in net income in Q3 compared to $9 million one year ago which beat analysts' estimates. This company's growth is unlike any other, and its guidance -- which expects fourth-quarter revenue growth of 14% sequentially and 199% year over year to $260 million -- shows that this trend can likely continue. 

The company has two primary risks. The first is that it is up against FICO -- a large, established company that has been integrated into the largest banks in the world. Upending the FICO score will be no easy task, and while Upstart currently looks up to the challenge, there is a risk of them not being successful.

The second risk is the company's customer concentration. While we have yet to get concentration figures for Q3, the company's customer concentration figures have fallen from one lender accounting for 67% of its loan volume at the end of 2020 to that same customer representing only 60% of Upstart's loan volume in the second quarter. That percentage share will likely drop further in Q3 as the company has added five new bank partners since it reported its Q2 earnings. 

Upstart crushed estimates, yet the stock dropped nearly 20% after it was reported. The likely cause for this was that it was trading at 60 times sales going into earnings. At 60 times sales, even strong earnings beats don't always satisfy Wall Street. However, investors who are interested in Upstart should seriously consider taking advantage of this dip. I have said before that I think this stock is one of the smartest stocks to buy today when the stock was much higher, so these prices are even more appealing to me. Because of its extreme growth and major disruption, I think Upstart has the potential to reward patient shareholders immensely over the coming decade. 

Which one of these two are best for you? It all comes down to risk tolerance. Upstart is still disrupting the market and will be subject to volatile price swings from quarterly results due to its expensive valuation. If it accomplishes its goal, the upside will be huge and crush Inuit's stock return potential. Intuit is the exact opposite. It's established and must innovate to fend off upstarts (pun intended) within its product categories. If it can do it, Intuit provides an investment with a low floor and market-beating return potential. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.