Two Canadian fintech stocks analysts think are undervalued

Fintech stocks could be finding support from renewed investment after a difficult stretch for the sector, according to Dmytro Spilka.

In an Oct. 14  article published by Barchart, Spilka argued that improving funding activity and a stronger mergers-and-acquisitions pipeline could help restore investor confidence. He cited global fintech investment of US$27.5-billion in the third quarter, up 35% year-over-year, while noting that inflation, shifting interest-rate expectations and concerns about AI disruption had weighed on the sector.

Spilka also suggested higher rates could benefit deposit-taking digital banks through increased interest income. That benefit does not apply equally across fintech: for lenders, financing costs and borrower credit quality remain important considerations.

Two Canadian stocks illustrate those differences. Propel Holdings is already generating profits and increasing its dividend, while AmeriTrust Financial Technologies is seeking the financing capacity needed to expand toward profitability.

TD Cowen analyst Graham Ryding maintained his “Buy” rating and $37 target on Propel Holdings  (Propel Holdings Stock Quote, Chart, News, Analysts, Financials TSX:PRL), pointing to growth in programs that require less capital.

As reported by The Globe and Mail, Ryding expects continued expansion from Propel’s lending-as-a-service and MoneyKey Bank Service programs. Together, they represented 28% of second-quarter revenue, compared with a historical average of 20%.

“We expect this capital-lighter revenue mix shift to continue, pushing the revenue yield higher,” Ryding said.

He cautioned that the benefits would be partly offset by higher anticipated credit provisioning, operating expenses and interest costs.

Propel reported second-quarter revenue of US$179.6-million, up 26% year-over-year, while adjusted EBITDA increased 24% to US$43.7-million. Net income rose 7% to US$16.2-million.

The company also increased its annualized dividend to $1.02 per share from 96 cents, marking its 12th consecutive quarterly increase.

Propel is scheduled to release third-quarter results after market close on Nov. 3.

AmeriTrust Financial Technologies

Clarus Securities analyst Noel Atkinson reiterated his “Speculative Buy” rating and 30-cent target on AmeriTrust Financial Technologies (AmeriTrust Financial Technologies In Stock Quote, Chart, News, Analysts, Financials TSXV:AMT)  citing a stronger balance sheet as the automotive finance company prepares to expand.

AmeriTrust’s cash exceeded $65-million, compared with $36-million at the end of June, following warrant exercises and earlier financings.

Atkinson said the additional cash should help the company secure expanded lease financing facilities. Those facilities, alongside regular lease portfolio sales or securitizations, are essential to supporting his growth forecasts.

He views 2026 as a launch year, followed by a ramp-up in 2027, and bases his target on 20 times estimated fiscal 2028 adjusted EBITDA.

Atkinson forecasts revenue of $4.4-million and an adjusted EBITDA loss of $9.3-million in fiscal 2026, improving to revenue of $16.5-million and positive adjusted EBITDA of $1.1-million in fiscal 2027.

He expects quarterly adjusted EBITDA to turn positive in the third quarter of 2027. Achieving that outlook depends on securing substantial funding capacity and controlling credit losses, with AmeriTrust focused on prime-credit consumers.