Should You Buy SOFI Stock After Q3 Earnings?

  • SoFi (SOFI) reported Q3 adjusted revenue of $419 million, up 51% YOY and beating analysts’ estimates.
  • The company currently trades at a price-to-sales ratio of 3.3x.
  • Shares of SOFI stock are down over 60% year-to-date.
SOFI stock - Should You Buy SOFI Stock After Q3 Earnings?

Source: Vi

Shares of SoFi (NASDAQ:SOFI) stock gained by over 15% after reporting third-quarter earnings, although the stock has since given up all of its gains. Adjusted revenue came in at $419 million, up 51% year-over-year (YOY) and beating the consensus analyst estimate of $393 million. On top of that, the company reported an earnings per share (EPS) loss of nine cents, beating the analyst estimate of a loss of 11 cents.

Earnings before interest, taxes, deductions, and amortizations (EBITDA), a key profitability metric, grew by 332% YOY to $44 million. Analysts were expecting EBITDA of $29.1 million, which meant that SoFi beat estimates by a solid 51%.

CEO Anthony Noto elaborated in a statement:

“We added nearly 424,000 new members, and ended with over 4.7 million total members, up 61% year-over-year. We also added over 635,000 new products, and ended with nearly 7.2 million total products, a 69% annual increase.”

Should You Buy SOFI Stock After Q3 Earnings?

The company’s bank charter, which was received earlier this year, has greatly benefitted consumer trust and deposits. During the quarter, total deposits grew by 86% to $5 billion. Of the new customers who opened deposit accounts during Q3, the median FICO credit score was 750.

Furthermore, total origination volume tallied in at $3.48 billion, of which $457.18 million was attributed to student loans. It’s worth noting that student loan volume is still down over 50% from the average pre-pandemic volume due to the federal student loan moratorium. On the bright side for SOFI stock, the moratorium is set to expire on Dec. 31, with payments expected to resume the following day. The remaining origination volume was $2.8 billion of personal loans and $216.24 million of home loans. Personal loan volume was up an impressive 71% YOY and was a record high for SoFi.

So, should you buy SOFI? The stock currently trades at a price-to-sales (P/S) ratio of 3.3x, while the industry median P/S ratio is 3.15. For context, the S&P 500 trades at a P/S ratio of 2.3x. SoFi’s P/S ratio is also nearing its one-year low of 3.02x. The stock can’t be valued on a price-to-earnings (P/E) basis because it is not yet profitable.

While the company’s P/S ratio is still above the industry median, SoFi has demonstrated resilient sales and customer growth in a tough economic backdrop. Even if you aren’t a fan of the company, it appears that SOFI stock has room to grow on a valuation basis. A P/S ratio of 5x would put SOFI in the $8 range.

On the date of publication, Eddie Pan did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Eddie Pan specializes in institutional investments and insider activity. He writes for InvestorPlace’s Today’s Market team, which centers on the latest news involving popular stocks.

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