Shares of Shift4 Payments have fallen over the past five years as investors have lost interest in fintechs.
The company is growing rapidly and generating free cash flow.
The valuation is cheap and free cash flow is poised to roughly double over the next three years.
10 Stocks We Like More Than Shift4 Payments ›
It’s a new year, and all investors are trying to do the same thing: find the best stocks to buy and hold in 2026. It’s a tough task, considering there are thousands of stocks to choose from. That’s why I like to narrow the search by looking at sectors that have been under pressure in 2025.
Investors often pay attention to an entire sector of the stock market. When this happens, virtually every stock in the sector is punished. This can result in a good company being thrown out with the bath water. And that’s why I’m looking at financial technology (fintech) today.
Fintech has underperformed by a wide margin in 2025. To illustrate, consider ETF Global X FinTech — an exchange-traded fund (ETF) with a focus on fintech stocks — compared to S&P 500. As the chart below shows, this ETF posted a loss for the year, in contrast to the market’s bright gains.
FINX data by YCharts
The fintech sector has had a challenging year, which makes it likely that there is good opportunity in this downtrodden industry. And I believe that Shift4 Payments(NYSE: FOUR) is such a stock.
Shift4 provides payment processing hardware and software to hospitality venues, stadiums, restaurants and more. This isn’t really unique — many industry players do this. But Shift4 has grown substantially by focusing on high-volume customers like the aforementioned stadiums.
Image source: Getty Images.
Few fintechs have grown as fast as Shift4 in recent years. In the last five years alone, revenues have grown by nearly 400%. Of course, its high-volume customer base tends to have lower margins, but that focus has helped the business scale. Moreover, management is relentlessly focused on profitability — specifically, free cash flow — despite margin headwinds.
Chief Executive Taylor Lauber said in his third-quarter letter to shareholders that Shift4 always prioritizes “where the next dollar is spent and with urgency as the business’s free cash flow improves each quarter.”
FOUR Price to Free Cash Flow; data by YCharts.
As the chart above shows, Shift4 has made consistent progress with its free cash flow, now generating over $350 million annually. But its share price has stagnated, meaning it now trades at a cheap valuation of 16.
As of this writing, Shift4 stock is down 6% over the past five years, even though S&P 500 increased by 85% — ugh! Not what we would expect from a high growth business.
Investors soured on the stock for a few reasons. First, they are concerned about the sector as a whole. Competition is fierce, making it difficult to gain long-term competitive advantages. And the sector faces disruption from cryptocurrency, a risk now more acute with crypto-friendly lawmakers in office.
Second, Shift4 makes large acquisitions, which leads to higher debt. In 2025, it acquired Global Blue, which handles tax refunds for foreign purchases, for $2.5 billion, a huge deal considering the company’s market cap is less than $6 billion.
The end result is that its debt has grown significantly in recent years. And the company has a high level of debt compared to cash, as the chart below shows.
FOUR Total long-term liabilities (quarterly); data by YCharts.
By no means is Shift4 in imminent danger, but its higher debt levels are worrying.
Investors may be concerned about Shift4’s debt, but management is not. If they were worried, they would probably focus some of that cash flow on reducing debt as quickly as possible. But management seems to be looking elsewhere.
At the end of the third quarter, management approved a $1 billion share buyback program and is likely looking to make some big purchases quickly. On the quarterly earnings call, Lauber said he was “incredibly excited to be able to deploy capital in such an obvious opportunity.”
In other words, Shift4 is authorized to reduce its share count by nearly 20%, and management can do so on short notice. This indicates that management has confidence in the strength of its business and the sustainability of its debt.
However, the company is also likely confident that its share price won’t stay cheap for long. It’s currently targeting an adjusted annual free cash flow rate of $1 billion by the end of 2027. That would signal free cash flow of at least $250 million in the fourth quarter of 2027.
Assuming Shift4 is on this path, its adjusted free cash flow would roughly double before the end of 2028. The valuation is already cheap. If it stays as cheap as it is now, the stock would double by 2028. Aggressive share buybacks would only increase its potential even more.
Shift4 stock was thrown out with the bathwater in 2025. But I doubt it will underperform much longer as 2026 rolls around.
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Jon Quast has positions in Shift4 Payments. The Motley Fool has positions in and recommends Shift4 Payments. The Motley Fool has a disclosure policy.
This Fintech Stock Poised for Explosive Growth Could Rise Over 100% by 2028. was originally published by The Motley Fool
