What happened

Shares of Remitly (RELY -3.58%) shot up over 10% this week, according to data from S&P Global Market Intelligence. The mobile-first remittance platform posted strong user and revenue growth last quarter, beating Wall Street expectations. As of 10:01 a.m. ET on Friday, shares of Remitly are up 14.5% in the last five trading days. 

So what

Remitly is a mobile-first platform that allows people to send money across international borders quickly and with low costs. Along with companies like Wise, Remitly is disrupting the legacy remittance market that traditionally had higher fees on international transfers. It is able to offer lower fees because of its digital-only model where customers can send money directly between two smartphones.

Last quarter (the last three months of 2022), Remitly's revenue grew 41% year over year to $191 million, significantly beating analyst estimates of $181 million for the period. This was driven by the number of active users growing 48% year over year to 4.2 million around the globe.

Active users growing faster than revenue is also a great sign, as new customers start sending more money through Remitly the longer they are on the platform.

There was a net loss of $19 million in the period. While Remitly eventually needs to achieve profitability, this is not a huge concern since the company has $300 million in cash on its balance sheet. As long as revenue growth remains in the strong double-digit territory, Remitly is creating long-term value for shareholders even if it is unprofitable today.

Speaking of growth, investors were likely also impressed with management's strong guidance for 2023. Revenue next year is expected to hit $860 million to $880 million, up 32% to 35% from 2022, with the company inching toward positive profit margins.

Now what

At a market cap of $2.36 billion, Remitly trades at a forward price-to-sales ratio (P/S) of 2.74 based on the low end of its 2023 guidance. It is impossible to value the stock on underlying earnings right now since it is unprofitable, but a low P/S combined with strong revenue growth is typically a recipe for fantastic long-term stock returns. 

If you believe Remitly can grow its active users at a consistent rate for the next few years, you will likely be happy buying shares today and holding them for at least 10 years.