Sezzle Inc (NASDAQ:SEZL) Fits the Affordable Growth Investment Strategy

For investors looking to balance the search for growth with a degree of caution, the "Growth at a Reasonable Price" (GARP) or "Affordable Growth" strategy offers a sensible middle path. This method tries to find companies with good and lasting growth, but whose stock prices are not too high. It avoids the speculative excitement that can follow high-growth stocks while also steering clear of value traps, companies that are inexpensive for a cause. By concentrating on stocks with good basic foundations in earnings and financial condition, the strategy works to assemble a collection of companies ready for future increase without paying too much for that possibility now.

One stock recently identified by an Affordable Growth screen is Sezzle Inc (NASDAQ:SEZL), a fintech company that provides a digital payment platform for point-of-sale consumer financing. According to a detailed fundamental analysis report, SEZL shows a profile that fits well with the main ideas of this investment approach.

A Base of Good Growth

The most notable part of Sezzle's fundamental view is its strong growth path, which is the main driver for any GARP investment. The company's Growth score of 8 out of 10 comes from outstanding results.

• Rapid Revenue Increase: Over the last year, Sezzle's revenue rose by 88.74%, a number called "very strong growth" in the report. This speed is not a single event; the company has maintained an average yearly revenue increase of 76.56% over recent years.
• Earnings Progress: Beyond revenue growth, Sezzle has also turned this increase into bottom-line profits. Earnings Per Share (EPS) increased by 17.05% in the last year.
• Future Outlook: Importantly for a growth investor, this progress is forecast to persist. Analyst projections suggest average yearly EPS growth of 24.42% and revenue growth of 43.69% in the next few years. While the future revenue growth rate is predicted to slow from its past fast speed, it stays very good, offering a clear path for future increase.

Valuation: Sensible Considering the Outlook

A stock with such growth numbers could easily have a high valuation. However, the Affordable Growth strategy specifically needs stocks to not be overpriced. Sezzle's Valuation score of 5 indicates a fair, sensible price relative to its outlook.

• P/E Ratios in Perspective: Sezzle trades at a Price/Earnings (P/E) ratio of 21.02. While the report states this is "rather expensive" on its own, it is important to see this in perspective. This ratio is similar to the industry average and is lower than the current S&P 500 average of about 26.6.
• Forward-Looking Numbers Are More Attractive: The forward P/E ratio, based on future earnings projections, is 14.58. This is also similar to the industry and seems much more appealing compared to the wider market.
• Growth Adjustment: The most significant number for a GARP investor is the PEG ratio, which modifies the P/E for expected growth. The report points out Sezzle's "low PEG Ratio," suggesting the stock's price is "rather cheap" when its high growth rate is considered. This is the central point of the affordable growth idea: paying a sensible price for better-than-average growth.

Supporting Fundamentals: Condition and Earnings

For growth to be lasting and the valuation to be fair, a company must have a good base. Sezzle also scores well here, which reduces risk for investors.

• Very Good Financial Condition (Score: 9): The company has a very good balance sheet. Its Altman-Z score of 9.35 shows no near-term bankruptcy danger and is better than over 92% of its financial services industry competitors. Good liquidity is shown by a Current Ratio and Quick Ratio of 3.52, indicating enough ability to meet short-term needs. While the debt-to-equity ratio is average for the industry, the report states that existing debt is low and very well covered by free cash flow.
• Satisfactory Profitability (Score: 6): After years of spending for growth, Sezzle has reached a size where profitability is becoming clear. Its Return on Assets (31.56%), Return on Equity (74.58%), and Return on Invested Capital (44.06%) are all near the top in its industry. Margins are also good, with a Profit Margin of 27.66% and a Gross Margin close to 85%. These numbers show the company's ability to effectively turn revenue into profit, a main factor that backs its valuation.

Conclusion

Sezzle Inc represents the Affordable Growth screening standards. It shows the forceful, clear growth that draws investors, yet its valuation, especially when seen through a forward-looking view and modified for growth, does not seem too high. This mix is backed by a very good financial position and developing, top-tier profitability. For an investor using a GARP strategy, these are exactly the traits that indicate a company deserving more study: one increasing quickly but not priced for ideal outcomes, with the financial soundness to manage its increase.

This review of SEZL came from a structured Affordable Growth screen. Investors wanting to find other companies that match this profile of good growth, sensible valuation, and sound fundamentals can view more outcomes using the Affordable Growth stock screener.

Disclaimer: This article is for informational purposes only and does not constitute financial advice, an endorsement, or a recommendation to buy, sell, or hold any security. Investing involves risk, including the potential loss of principal. Always conduct your own due diligence and consider consulting with a qualified financial advisor before making any investment decisions.