Zip Co, the fintech stock climbed over 10% as growth sectors rebounded.
Zip Co is one of the ASX growth stocks which is currently trading at a discount relative to its future growth potential and has consistently delivered impressive revenue growth with expanded margins helped by scale benefits.
Zip Co Limited (ASX: ZIP)
has plunged 52% year-to-date and the market capitalisation is now $2 billion which places the stock in undervalued territory compared to historical levels.
The company in 1H FY26 reported exceptional financial results as total income rose 29.2% year-on-year to $664 million while cash gross profit rose 33.5% to $314.3 million.
Cash EBTDA in the same period increased 85.6% to $124.3 million and the operating margin improved to 18.7% which indicates better profitability and scale benefits.
Total transaction volume rose 34.1% to $8.4 billion while total transactions increased 20.2% and active customers reached 6.6 million.
The US business is still the main growth driver as revenue increased 46% year-on-year and cash EBTDA rose 69.5% which highlights the large BNPL opportunity in the US market.
Revenue in the ANZ segment increased 3.1% while cash EBTDA rose 138% and excess spread improved to 9.3% which shows better margins and credit performance.
The company also completed a $100 million share buyback and issued a $400 million ABS bond at lower funding costs which improves the balance sheet and reduces interest costs.
Customer growth is strong as the number of merchants increased and deeper engagement led to higher transactions per customer in both the US and ANZ markets.
The company has invested in automation and AI which will help improve credit decisions and improve margins over time.
Management stated the company is well positioned for the next phase of growth and the outlook is great as revenue growth and margin expansion along with US growth are expected to support future earnings.
(Source: Company Announcements)
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