We would all love to buy a stock whose price goes parabolic, producing exponential gains for shareholders. The great technology companies of our time, such as Amazon, Netflix, and Tesla, have delivered these types of gains for investors. However, with these stocks trading at market caps in the hundreds of billions or even trillions of dollars, it is unlikely that future gains will be so lucrative.
In order to find the next group of stocks that will go parabolic over a 10- to 20-year period, you need to be searching for smaller companies. One sneaky financial technology (fintech) stock comes to mind when considering future parabolic stocks: Remitly Global (RELY 1.06%). This international payments player, which is an emerging giant in the remittance market, is growing quickly while trading at a cheap valuation.
Here's why shares of Remitly Global may go parabolic for investors over the next decade.
Rapidly growing underlying business
The first thing needed for a parabolic stock is fast growth. Remitly hits this mark with flying colors.
The mobile-first remittance provider has grown its revenue by a cumulative 469% in the last five years, making it one of the fastest-growing fintech companies in the world. Last quarter, the dollar amount flowing through its platform grew 40% year over year to $18.5 billion, leading to 34% revenue growth to $412 million. Revenue growing slower than payment volume is not a bad sign, as it shows the reduced fees charged to customers as the platform gains more scale.
Remitly has gained product adoption from its 8.5 million active customers by building an easy-to-use mobile application with low fees that can distribute money in a variety of ways for international money transfer recipients. This makes it a better product than legacy players for both the sender and receiver of money, which is why so many people are switching to the application.
Remitly's business is centered on sending money from the United States today, but is increasingly expanding to new markets. Its Rest of World revenue grew 40% year over year to $97.5 million last quarter and now makes up 24% of overall revenue. Global expansion should help Remitly keep up this high level of revenue growth, which will reward shareholders who hold for the long term.
Image source: Getty Images.
Stealing market share, expanding addressable market
At sub-5% of the remittance market globally, Remitly has a lot of room to keep stealing share from players like Western Union in the years to come. However, this is not all the company is working on, as it hopes to become a full suite of financial services for people and businesses looking to send money around the world.
It recently launched a suite of tools specifically for small and micro businesses sending money internationally, which is a huge addressable market of $22 trillion, according to the company's second-quarter earnings report. On new products, it is about to launch a wallet for customers to store money while adding services such as "send now, pay later" to help people easily send money even if funds are not in their accounts that day.
In the long term, Remitly wants to help people spend money internationally, which will likely mean a debit and credit card for Remitly customers. All of these new products and services should help Remitly further differentiate itself from the competition while also giving it a long runway to grow.
Will Remitly shares go parabolic?
If you believe in Remitly's ambitious plans to dominate the international remittance market while expanding into small business transfers and adding new financial services offerings, then the company will have a much larger revenue base than its projected $1.6 billion for 2025.
At well under $100 billion in annualized transfer volume in a market that has trillions of dollars of money transfers each year, the company can keep stealing market share at a rapid clip before getting anywhere near market saturation. New revenue from products like the Remitly Wallet can add more gasoline to the revenue growth party.
All this to say, it is plausible that Remitly can grow its annual revenue to $5 billion and eventually even higher within the next 10 years. Today, it has a market capitalization of just $3.9 billion. As an asset-light business with strong unit economics -- gross margin is approaching 60% -- this is a dirt-cheap stock that can produce parabolic returns for investors who buy today and hold for 10 years.
