Remitly: The Fintech You Can't Ignore (And Why It's Still Cheap)

Forget the hype cycles. The real alpha is hiding in plain sight, in a sector most investors have written off. Remitly Global (RELY) is a high-quality, cash-generating fintech trading at a deep discount, and the market is pricing it for failure while it's actually executing. This is a classic contrarian setup.

The core thesis is simple: Remitly has built a dominant, digital-first platform with operational strength that doesn't match its depressed stock price. It's the leading digital remittance platform, and that leadership is sticky. Customers are loyal, with retention stabilizing at 85%-90% and an average of 16 transfers annually. That's an annuity-like model, not a one-off transaction business. The company is scaling fast, with revenue up 34% last quarter and total payment volume surging 40% year-over-year. Yet the stock has been punished, down 20.1% over the last 120 days and trading at a trailing P/E of 201.3 (a forward P/E of 79.2). That valuation gap is the signal. It doesn't reflect the 34% growth or the path to 25%+ free cash flow margins.

So why the skepticism? The market is fixated on overblown fears. The narrative centers on stablecoins as a disruptive threat and potential immigration regulation headwinds. But the evidence shows these are largely noise. Stablecoins remain a minor consumer threat with nascent adoption and regulatory resistance. Immigration policy, in fact, may favor digital flows, with recent frameworks penalizing cash transfers. The real competition is legacy cash-heavy networks like Western Union and MoneyGram, which face structural inefficiencies. Remitly's digital-first approach with features like debit card pay-ins and one-click repeat sends is the clear winner.

The bottom line? Remitly's operational strength-its leading platform, high retention, and rapid growth-is being ignored because of speculative fears. The stock trades at a deep discount to its growth and cash flow potential. This isn't a value trap; it's a value opportunity in a boring sector that's finally getting the digital upgrade.

The Breakdown: Profitability & Cash Flow Are the Real Story

Forget the noise. The real alpha in Remitly is in the P&L. The company is executing a textbook digital transformation: scaling revenue while crushing costs to deliver explosive profitability. This is the signal the market is missing.

The top-line momentum is undeniable. In Q3, revenue grew 25% year-over-year to $419.5 million, fueled by a 35% jump in send volume. That's strong organic growth in a competitive space. But the real story is what's happening below the line. Net income exploded 361% to $8.8 million last quarter. That's not just a beat; it's a structural shift toward efficiency. The company is leveraging its digital platform to scale profitably, not just top-line.

Analysts see this as a trend, not a fluke. They forecast 43% EPS growth for 2025. That kind of acceleration is rare for a company still growing at a 25%+ clip. It shows the business model is maturing, with each new dollar of revenue generating far more profit than before. This is operational leverage in action.

The ultimate test is cash flow. Remitly is on track for 25%+ free cash flow margins. That's the metric that justifies the low valuation. It means the company isn't just profitable on paper; it's converting that profit into cash that can be reinvested, returned to shareholders, or used to pay down debt. In a sector where many fintechs are still burning cash, this path to high-margin, cash-generating growth is a massive competitive advantage.

The bottom line? The market's focus on short-term earnings misses is a distraction. The financial drivers are clear: revenue is scaling, costs are being controlled, and profitability is accelerating. This isn't noise; it's the foundation of a durable, high-quality business. Watch for the cash flow to keep marching higher.

Valuation & Catalysts: The Alpha Leak

The setup is clear. Remitly trades at a deep discount to its cash-generating potential, and the next catalyst could force a major re-rating. Let's quantify the upside and map the near-term path.

The valuation gap is the alpha leak. The stock is priced for a slow, grinding business. In reality, it's a high-margin cash machine scaling fast. The math is stark: Remitly trades at less than 8x estimated 2027 unlevered free cash flow. That multiple is a steep discount for a company with 34% revenue growth and a path to 25%+ free cash flow margins. It reflects market fears, not fundamentals. This is the core opportunity.

The next major event is the catalyst. Management will discuss the full-year outlook and any guidance updates on the Q4 earnings call scheduled for February 18, 2026. This is the first chance since the Q3 miss to see if the company is raising its 2025 targets. A solid Q4 report and raised guidance would directly challenge the narrative of stagnation and justify a higher multiple.

Beyond the call, watch for execution and confidence. Continued success in international expansion is critical for scaling the model. More importantly, watch the stock's volatility. It's currently high at 2.6% daily. That level of choppiness signals uncertainty and fear. As the company demonstrates consistent execution and cash flow, that volatility should compress. Lower volatility is a sign of building institutional confidence, which often precedes a re-rating.

The bottom line? The valuation is a trapdoor for the patient. The February earnings call is the immediate trigger to reset expectations. If management confirms the growth and profitability trajectory, the market's deep discount could close fast. Watch the call, the expansion, and the volatility for the first signs of a re-rating.