The recent banking crisis caught many investors off guard. So are there any bargains now in the financials sector?

While one approach could be to pick through the carcasses, perhaps a better one is to invest in the long term secular winners - especially as traditional banks dial back expansion plans to protect their balance sheets.

That's especially true within the international forex payments segment, where much cheaper, tech-enabled and - importantly - client-focused providers such as Argentex (AGFX) have been gaining market share in recent years.

That saw it post record 2022 results, with adjusted EBIT and EPS of £12.3m and 8.8p respectively on sales up 46% to £50.4m thanks a higher number of clients using the platform (+8% to 1,749) alongside average revenues per account climbing 45% to £29k a year. 

The group has also enjoyed a strong start to 2023, with Q1 2023 turnover rising 34% on a like-for-like basis to £12.7m as “more customers continue to trade more products (eg multicurrency IBANs), more frequently and across more geographies (eg Netherlands & Australia).”

To me this is a winning strategy that is sustainable and should generate increasing top and bottom line growth, as positive operating leverage and further economies of scale kick in over the years ahead.

That's being support by fast growth of online revenues, which impressively jumped 89% to £1.2m for the 9 months ending December 2022. Sure, this was from a small base. Yet equally, this is the just the taster for a whole suite of technology enabled products to be launched, providing improved efficiency and the "right tech, right touch" for institutions & corporates. Moreover the Board will also continue investing in its “people and overseas expansion”.

In terms of the forecasts, broker Singer Capital Markets has a target price of 200p a share, based on 2023 sales, EBITDA and EPS forecasts of £60.0m, £17.5m and 9.0p respectively, climbing to £74.0m, £22.5m and 11.8p 12 months later. 

At the current 128p, this puts the stock on attractive 2023 EV/EBITDA, EV/EBIT and PE multiples of 6.8x, 8.6x & 14.2x. That represents an undeserved discount to the broader sector, especially given Argentex’s projected 19% top line growth rate for 2023, 11% free cashflow yield and £26.2m of net cash

CEO Harry Adams commented: "Our business is experiencing excellent momentum, demonstrated by 63% revenue growth over the 9 month period and 34% revenue growth in Q1'23. The successful combination of people, technology and international expansion are expected to generate a strong return through growth in revenues, increased profitability and continued earnings quality."