Neo-bank SoFi Technologies, Inc. has been making waves in the financial sector. SoFi\’s most recent results show growth in deposits and stabilisation of liquidity ratios in the midst of a global banking crisis, making it a secure investment for investors. Despite this, the stock is currently trading at a significant discount and might be a good investment for the long term. In this article, we\’ll examine SoFi\’s finances in more detail and talk about why it might represent a profitable investment opportunity.
SoFi is Gaining Customer Trust as Deposits Grow
Compared to many other notable banks, SoFi\’s deposits have grown by more than 535% in just the last four quarters. This implies that consumers are giving SoFi their deposits at a rapid rate, turning it into a primary bank for many of them. The fact that SoFi\’s deposits are growing quickly is in contrast to other major banks\’ deposits declining, which suggests that SoFi is edging out bigger banks for market share. Even though these market share increases are modest for the time being, they are nonetheless impressive and a sign of future sustainable growth. Last but not least, unlike a few other banks that failed in the past month or so, SoFi\’s rapid deposit growth suggests that it won\’t have a bank run by its customers anytime soon.
SoFi is in an Enviable Position for Stabilizing Liquidity Ratios
In recent times, SoFi\’s liquidity ratios have significantly deteriorated. In Q2 and Q3, it experienced sequential declines in its CET1 ratio of 4470 basis points and 750 basis points, respectively. The situation on the ground, however, is not as bad as many market commentators had predicted. SoFi\’s CET1 ratio decline slowed to 180 basis points in Q4, suggesting that SoFi\’s liquidity ratios have stabilised. There\’s a good chance that SoFi\’s CET1 ratio will stabilise in its upcoming 2 earnings reports as the world adjusts to the new reality of high interest rates and the Fed slows its pace of rate hikes to 25 basis points this time around. Since SoFi\’s liquidity ratios far exceed the necessary minimums, it won\’t be urgently necessary for SoFi to recapitalize the bank or to dilute shareholders any time soon.
SoFi\’s Revenue Growth Across All Segments
SoFi\’s revenue is increasing across all 4 reporting segments, showing that the company is effectively monetizing its customer base and that its expansion is ongoing. Once the moratorium on student loans is lifted and student refinancing begins to flow, its growth will pick up even more speed. It is evident from SoFi\’s revenue growth across all segments that it is gaining traction in the financial sector.
SoFi\’s Shares Are Attractively Priced According to Valuation Talk
Shares of SoFi are currently trading at about 2.7 times trailing 12-month sales, which, while it may appear high on its own, is actually quite low given that the indicator is hovering around its 2-year lows. SoFi\’s Price-to-Sales multiple is comparable to that of its larger competitors, despite the fact that the latter group is growing at a much slower rate and is seeing a decline in deposits due to the ongoing recession. This implies that either SoFi is undervalued or the bigger banks are overvalued. On a stand-alone basis, the price of SoFi\’s shares appears to be reasonable.
SoFi is a Good Buy for Investors with a Multi-Year Time Horizon: Investor Takeaway
Financially speaking, SoFi Technologies, Inc. has started to stabilise, customer traction metrics are improving, and the company\’s valuation is at an all-time low. Despite the fact that there is a global banking crisis, SoFi Technologies presents a good buying opportunity for investors with a long time horizon. The liquidity ratios of SoFi Technologies, Inc. are in the process of stabilising, and its deposits are expanding quickly. Shares of SoFi Technologies, Inc. are arguably trading well into oversold territory at low valuation multiples. Investors might want to benefit from SoFi\’s current stock price discount before it inevitably rises.