So far, 2022 hasn't exactly been kind to the stock market, and many different industries have been affected. Growth stocks have been particularly hard hit, but value stocks haven't exactly been spared.
With that in mind, there are some especially compelling opportunities in the financial sector right now for patient long-term investors. Here are two financial technology, or fintech, companies, as well as one massive bank that could be worth a closer look right now.
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A fintech ecosystem with lots of room to grow
Block (SQ -3.57%), formerly known as Square, has been one of the most beaten-down stocks in the market recently. Even after a post-earnings pop, shares are still more than 55% below their mid-2021 peak. To be fair, there have been shareholder concerns about the Afterpay acquisition and CEO Jack Dorsey's focus on cryptocurrency.
However, it's important to realize that the company's core seller and personal ecosystems are doing very well. Block generated gross profit of more than $4.4 billion in 2021, and nearly half of that came from the Cash App side of the business, which has grown more than tenfold in the past three years alone. The Cash App ecosystem's network effect is only strengthening over time, with over 44 million active users, and with about $170 billion in annualized payment volume, the Square seller business continues to grow at a rapid pace.
Given its massive reach and continued impressive growth, as well as the long-term potential in its "buy now, pay later" business and international expansion, Block seems like a bargain at roughly nine times trailing-12-month revenue.
Could this be the true bank disruptor we've been waiting for?
SoFi (SOFI -3.95%) went public via a special purpose acquisition company (SPAC) in 2021, and its business had an incredible year. Adjusted net revenue grew by 54% in the fourth quarter. Even more important from a long-term perspective, SoFi's membership base increased by a staggering 87% year over year to 3.5 million people (500,000 more than the company's own goal). And these customers have a total of 5.2 million financial products with the fintech disruptor.
While the fourth-quarter earnings report was impressive, the best could be yet to come. After all, SoFi gained approval for a banking charter and started SoFi Bank operations after the end of 2021, and doesn't expect it to have a material impact until the second quarter. Plus, the Super Bowl was just played at SoFi Stadium, which should do wonders for its brand awareness. Despite the tremendous progress, SoFi trades for less than half of its 2021 high, so now could be a great time to take a closer look.
The smartest people on Wall Street
Last but certainly not least, Goldman Sachs (GS -0.95%) has dropped by more than 20% this year and looks like a steal.
If you aren't too familiar with the business, Goldman is one of the largest investment banks in the world, with massive operations in debt and equity underwriting, client-advisory services, and wealth management, among other things. It operates one of the largest trading operations in the world and owns a portfolio of private equity and other investments. All of these are steady moneymakers, but Goldman has an up-and-coming consumer-banking operation -- you may have heard of the Marcus savings and loan platform -- with tons of potential.
2021 was an incredible year for Goldman, with record highs for revenue and earnings and a 23% return on equity, which means this is one of the most profitable operations in the financial sector. With the stock trading for less than six times trailing earnings, Goldman could be a great bargain for patient long-term investors.
Buy for the long run
As a final thought, it's important to emphasize that I'm calling these stocks undervalued from a long-term perspective. There's quite a bit that could go wrong in the near term, and it's reasonable to expect the current market volatility to persist for a while.
As an example, if the situation in Ukraine gets worse or inflation proves to be more difficult to control than the Federal Reserve expects, it's entirely possible these stocks could take a short-term hit. But all three have massive long-term opportunities and should deliver great returns for patient investors who get in during these turbulent times.
