Its market capitalization approaches $300 billion, with total assets on its balance sheet reaching $3.3 trillion. american bank It is definitely one of the largest financial institutions.It is also known as one of the companies led by Warren Buffett. berkshire hathawayTop holding stocks.
If that happens, you might start paying more attention to this bank stock or even buy shares. But if you keep reading, you might soon forget about Bank of America and strongly consider buying a great bank instead. bank stocks I will introduce them below.
strong growth trend
Capitalism produces (and requires) constant innovation. There is perhaps no more innovative business in the banking industry. SoFi technology (NASDAQ:SOFI) I have it. The company went from focusing solely on student loan refinancing to becoming a fully digital banking powerhouse. SoFi offers checking and savings accounts, brokerage services, credit and debit cards, and a variety of loan products.
The business has grown rapidly over the years. He has 7.5 million customers, up from less than 1 million four years ago. As a result, from 2019 to 2023 his revenue increased by 375%. SoFi is clearly doing a good job of catering specifically to the needs of its user base and attracting high-income, digitally savvy customers.
Even in a high interest rate environment that should be a headwind for any bank, SoFi has reported tremendous growth, which is very encouraging. Last year's revenue increased by 35%. Bank of America, meanwhile, saw sales decline 2% in the just-ended first quarter.
Investors can be optimistic that SoFi's growth will continue over the long term. Management expects revenue to grow 20% to 25% annually over the next three years. If the company succeeds in entering international markets, even as remote as the U.S., the runway for expansion becomes even larger.
Considering profitability
Bank of America deserves credit because it has a much longer history of operation than SoFi. This means that we have built the core competencies in running a large financial institution profitably. Steady earnings can help drive dividends and share buybacks, which may be attractive to some investors, especially those looking to own a business with a proven track record of returning cash to shareholders.
SoFi has not been profitable throughout its history because it has prioritized growth above all else. Like any technology or software company, the goal of the game is to invest aggressively to build the product and attract more users. But things are changing when it comes to the bottom line.
In the last three months of 2023, SoFi reported its first quarterly profit as a publicly traded company; Earnings per share (EPS) of $0.02 and GAAP profit of $48 million. This is tiny compared to its $2.1 billion in sales. However, management has provided hints about what's to come in the future.
SoFi bulls have a lot to be excited about. That's because management believes SoFi's EPS will be between $0.55 and $0.80 in 2026. Thereafter, EPS is expected to increase by 20% to 25% annually.
Of course, it's wise to take these estimates with a grain of salt. This also suggests that SoFi is starting to make better use of its operating costs and is likely turning a financial corner.
SoFi stock has return potential
It's understandable why investors looking for exposure to the banking industry would look to Bank of America. It's a durable business that has stood the test of time. The fact that Mr. Buffett is the largest shareholder is also a tailwind.
But if you want to achieve above-market returns over the long term, SoFi is the clear winner. The combination of strong revenue growth and accelerating returns creates the perfect recipe for successful investing. If you think the stock is risky, you may want to start with a smaller position in your portfolio.
Should you invest $1,000 in SoFi technology right now?
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Bank of America is an advertising partner of The Motley Fool's Ascent. Neil Patel And his client has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bank of America and Berkshire Hathaway. The Motley Fool has Disclosure policy.
Forget Bank of America.Buy this great bank stock instead Originally published by The Motley Fool