3 US Growth Stocks With Earnings Growth And Funding Risk

With the Federal Reserve signaling a pause in rate hikes and major tech earnings lifting market confidence, growth stocks are back under the spotlight for investors weighing risk against potential opportunity. Slower inflation and steadier borrowing costs can reshape which companies are able to fund expansion and sustain revenue momentum, while ongoing geopolitical and supply chain risks keep selectivity important. This article walks through 3 stocks from a Growth Stocks screener that appear closely tied to these shifting conditions, and may help you decide whether each one might deserve a closer look or a place on your watchlist as the story develops.

Overview: Sezzle is a Minneapolis based buy now, pay later and digital payments company that lets consumers split purchases into short term installments at the checkout, either online or in store, while giving merchants a way to increase order sizes and conversion without handling credit risk themselves.

Operations: Sezzle generates all of its US$480.9 million in revenue from lending to end customers in the United States.

Market Cap: US$5.5b

Sezzle stands out in the Growth Stocks screener because it sits at the crossroads of younger consumers’ preference for flexible payments and a funding backdrop that currently looks more supportive, with the Federal Reserve pausing rate hikes and recent news pointing to lower funding yields and delayed rate increases. The company is already profitable with strong earnings growth expectations and high return on equity, and recent quarters show revenue and guidance figures that have impressed the market. At the same time, investors need to weigh funding that relies fully on external borrowing, rising credit losses and a large one off loss that clouds recent earnings quality. How those strengths and pressures balance out is where the real story on Sezzle begins.

Sezzle’s profitable growth story sits on top of fully externally funded lending, so the real question is how sturdy that engine is as conditions evolve, which is exactly what the Sezzle financial health report

Overview: Remitly Global is a Seattle based fintech that helps people send money across borders through a mobile app and website, offering digital remittances and related financial services for customers in the United States, Canada, and many other countries.

Operations: Remitly Global generates about US$1.7b in revenue from data processing, with around US$1.1b from customers in the United States, US$168.1m from Canada, and US$414.7m from the rest of the world.

Market Cap: US$4.4b

Remitly Global is squarely in focus for growth investors because it sits at the intersection of rising digital payments usage and a more supportive backdrop for tech stocks, with the Federal Reserve pausing rate hikes and recent big tech earnings helping rebuild confidence. The company has turned profitable, reports high quality earnings, and analysts expect revenue and earnings growth that outpace much of the market, helped by products like Remitly Business, WhatsApp Send and new wallet and stablecoin features. On the flip side, the stock trades on a high P/E, depends fully on external funding rather than customer deposits, and faces regulatory and competitive pressure in cross border payments. How those positives and risks net out is where the deeper Remitly Global story starts to get interesting.

Remitly Global’s shift to profitability with high quality earnings and a premium P/E suggests the market is pricing in a lot, but maybe not everything. This is where the analyst forecasts for Remitly Global might reveal what most investors are missing

Overview: DLocal is a Montevideo based payments company that helps global merchants accept and send money in emerging markets, connecting them to local cards, bank transfers, cash payments and alternative payment methods through a single cross border platform.

Operations: DLocal generates about US$1.2b in revenue from payment processing across markets such as Brazil, Mexico, Argentina, other Latin American countries and non Latin American regions.

Market Cap: US$3.8b

DLocal appears in a Growth Stocks screener because it combines high earnings growth, strong return on equity and exposure to fast growing digital commerce in emerging markets, at a time when lower rates and more positive sentiment toward technology are in focus. The business is built on a capital light model that processes rising volumes for global merchants and has recently paired guidance for double digit growth with a sizeable buyback and dividend. However, the stock price and some DCF work suggest the market is still cautious after concerns about take rates, margins and funding risk. For investors, the central question is whether the current valuation properly reflects both that growth profile and the governance and regulatory risks built into this cross border model.

DLocal’s capital light model, along with its guidance for double digit growth and shareholder returns, has the market conflicted, so the real question is what the analyst forecasts for DLocal is signaling about where the next surprise could emerge.

The three growth stocks covered here are just a starting point, with the full Growth Stocks screener surfacing 23 more companies that pair strong recent revenue growth with forward looking financial metrics that may support equally compelling narratives. If you want to identify and analyze stocks with the exact catalysts discussed here, including earnings quality, funding structure and balance sheet strength, head over to the Growth Stocks screener.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data
and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your
financial situation. We aim to bring you long-term focused analysis driven by fundamental data.
Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
Simply Wall St has no position in any stocks mentioned.

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