The business

Admittedly this is not a household name. However, Kaspi.kz is an extremely versatile business offering a range of payments, marketplace, and fintech services mainly through its mobile app. In addition to the usual services expected with a banking app, users can book flights, rent cars, and order groceries. Primarily serving the digital service sector in Kazakhstan, the market is small but growing steadily.

Why would an investor be interested?

Growth stocks are all about potential. With a slick platform that allows users to do so many things in one place, this could easily catch on. With the success of similar apps in China, western countries have been trying to develop a similar platform. A notable example is Elon Musk’s wholesale changes to X.

Earnings growth of 22% per year is fairly close to the average of the sector, but the company is operating at an extremely high level of efficiency. The return on equity is an impressive 78%, dwarfing the sector’s average of 14%. If the firm can continue to grow while being so efficient, the future could be bright.

It’s also worth noting the very generous 7.9% dividend yield. This payment is well supported by earnings, and is expected to grow further over the coming years. Of course, dividends are never certain and can be cut or cancelled at any time.

Risks

Obviously, the market is rather small, given the country’s population of just over 19m. And, with the tense geopolitical situation, there is a risk that companies in certain areas could suffer from supply chain constraints.

Another factor is the scale of insider ownership. A huge 48% is owned by the executive team. This can be seen in two ways, where those at the top benefit greatly from solid performance, but also potentially reduces the level of transparency to other shareholders.

However, with the shares valued at $178.61, there could be a healthy 47% more room to grow from the current price, based on a discounted cash flow calculation. This is not a guarantee of course, but investors could see patience rewarded.

Am I buying?

I think there is a really interesting future ahead for Kaspi.kz. Clearly it is a very effective platform, well used and liked by a growing number of users. Many larger apps could only dream of success like its daily engagement rates of 65%. If such an efficient and popular platform can be taken to new markets, or adopted by a larger business, there could be enormous potential here. I’m adding it to my watchlist, and will be picking up this growth stock at the next opportunity.

The post This growth stock might just be getting started appeared first on The Motley Fool UK.