Wise (LSE: WISE) shareholders are likely feeling happier after the fintech posted an eye-catching set of results on 27 June. The stock was up 20% as of 13:15 p.m. on Tuesday.
This adds to an already strong run in the share price, which has now rocketed 66% over the last year. However, the shares are still down 30% since the money transfer firm went public in July 2021.
So, could this be an opportunity to add this high-growth stock to my portfolio? Let’s find out.
Excellent progress
For the year to 31 March, Wise reported soaring profits thanks to more active customers and higher interest rates. Here are some of the highlights :
- £846m in revenue, a 51% increase over the previous year
- 234% rise in pre-tax profits to £146.5m, up from £43.9m
- 97% jump in underlying earnings, to £238.6m
- 34% increase in active customers, taking the total to 10m
- £104.5bn moved across international borders, a 37% increase
Higher interest rates enabled the firm to record £118.2m in account interest income. It intends to use this to offer further incentives, including higher interest payments in its savings accounts.
Another noteworthy positive was that the company retained 100% of its customers, with 66% of new customers joining through word of mouth.
This demonstrates how strong the customer value proposition is here. And Wise stated that “what customers love is instant payments“, as 55% of all cross-border transfers were delivered instantly in Q4.
During the year, it launched instant payments from Singapore to Malaysia, as well as in and out of Brazil. Additionally, new partners are being integrated in Japan, Chile, and the US, all done to speed up transfers to and from those locations.
Looking forward, the firm expects total income growth of between 28% and 33% in the current financial year. This is stronger growth than most analysts were expecting.
Some things to consider
Now, it should be pointed out that last year was an extraordinary one as the firm benefited from higher interest income on its customers’ accounts. This exceptional level of growth is highly unlikely to be repeated again.
Indeed, the company is predicting a lower volume per customer over the coming months as the economy slows.
Plus, the company is facing some executive changes. Its co-founder and chief executive Kristo Käärmann was embroiled in a tax scandal in the UK. He is due to take an extended sabbatical between September and December to spend time with his family.
As a driving force behind the company’s success, this creates a level of ‘key-person risk’ were he to leave his role permanently. There is no suggestion of that right now, but it’s worth considering.
Also, long-standing CFO Matt Briers is due to depart by March 2024 to focus on recovering from a serious cycling accident he suffered last year.
Are the shares a buy?
Every year, hundreds of millions of people and businesses move £11trn between currencies, and this market is growing rapidly.
So Wise, which has ambitions to be a “generational company“, is barely scratching the surface of its total addressable market.
The shares aren’t trading cheaply, but fast-growing disruptive companies rarely do. If I had spare cash to invest today, I’d buy the stock with a minimum five-year holding period in mind.
