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Top Picks 2019: Green Dot (GDOT)

01/11/2019 5:00 am EST

Focus: FINANCIALS

Timothy Lutts

Publisher, Cabot Heritage Corporation

Green Dot (GDOT) is a little-known bank holding company with a great story and an amazingly broad reach. In fact, the company believes it has the most widely distributed financial services and banking franchise in the U.S., asserts Timothy Lutts, chief analyst and editor of Cabot Stock of the Week.

The company works behind the scenes in most cases, but that’s been enough to produce an enviable track record of growth in recent years.

It has both a product and a platform business. On the product side, Green Dot has a slew of offerings, though its core products are simple things like bank accounts, checking accounts, prepaid (and reloadable) debit cards and credit cards with a slew of perks.

The firm’s distribution network for its various products is amazingly large, with more than 100,000 brick and mortar locations selling its cards.

The platform business, which it refers to as banking-as-a-service, allows partners to develop their own banking and financial offerings for their customers. Apple Pay Cash runs on Green Dot’s platform, as do Walmart’s MoneyCard and Intuit’s Turbo card,

All told, Green Dot makes money from transaction fees, recurring monthly account fees, interchange fees and interest income. And all four areas have been growing steadily as the company expands its partnership and reach.

Revenue growth has averaged 22% over the past four quarters (revenues were $230 million in the 3rd quarter), while earnings growth has averaged 50%. Analysts are looking for 13% earnings growth next year, but that almost certainly is too conservative.

As for the stock, it’s been in an uptrend over the past three years, but as we approach the end of 2018, it’s 20% off its high, presenting you with a nice buying opportunity.

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