Bancorp (TBBK) has rolled out a new embedded finance platform called Finetics, giving nonbank businesses a way to plug payments and banking tools directly into their digital products.
The Finetics announcement comes after a difficult period for Bancorp’s shareholders, with the stock down about 27% on a year-to-date share price basis and the 1-year total shareholder return declining roughly 34%, even though the 3-year and 5-year total shareholder returns remain solidly positive.
Compare Bancorp's embedded finance push with other potential fintech-backed opportunities by scanning our hand-picked 20 high quality undiscovered gems that are still flying under most investors' radar.
Bancorp’s shares have already given up a chunk of recent gains, even as Finetics pushes the business deeper into embedded finance. Is most of the easy rerating already gone, or does the current valuation still point to further potential?
Most Popular Narrative: 5% Undervalued
Bancorp last closed at $49.38, while the most followed narrative pegs fair value at $52. That gap is small in price terms, yet the underlying thesis leans heavily on how durable returns on equity and partner relationships prove to be in practice.
I built a five-year version that tracks book value, with returns fading from today’s levels and an 11% cost of equity. If Chime is the only partner that leaves, returns fade to about 28% and the stock is worth about $56. If the market’s contagion fear is right, they fade to about 24% and it is worth about $48, today’s price. If management’s plan is partly delivered it is about $69, and if returns revert to the 2021 to 2022 level of 18%, about $36.
See why 1 investors see Bancorp as 5% undervalued.
Result: Fair Value of $52 (UNDERVALUED)
Still, two things could flip this Bancorp narrative quickly: a second large fintech exit and any sign that partner concentration is weighing on pricing power.
Find out about the key risks to this Bancorp narrative.
Next Steps
Sentiment on Bancorp in this piece might feel mixed, with clear concerns but also some genuine bright spots that investors are watching closely. If you want to move beyond headlines and stress test the thesis yourself, start with the underlying red flags and potential upsides highlighted in the 5 key rewards and 2 important warning signs.
Looking for more Bancorp investment ideas?
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- Target stronger pricing power by reviewing companies with durable cash flows and quality metrics through the 35 high quality undervalued stocks.
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