Jul 7, 2022
[4 min Read]
You are probably aware that SoFi Technologies, Inc. (NASDAQ: SOFI) is a leader in the Credit Services space. In this analysis, we are going to look at some of the key financial ratios for SoFi Technologies, Inc. to determine a price prediction for SOFI. Remember these price predictions take into account several assumptions (which I will highlight) to determine a future price. I'll share my SOFI stock price prediction, then show you the approach and assumptions used to calculate the SOFI stock forecast.
Before we go any further, let me start by saying this, stock forecasting is hard. I don't know what the future will hold, and neither do Wall Street Analysts. If they could accurately predict the future, they would be able to beat the S&P 500 and I would be extremely wealthy. What I can say is that we can use available data to determine a reasonable SOFI stock forecast and helps us make better investment decisions, so hopefully, you find this analysis useful.
The SoFi Technologies, Inc. stock price prediction of $8.18 was derived from 2 main valuation methods (which are averaged for the final price target you see above). I'll dive into the approach to show you how I determined how I “predicted” a stock price of $8.18 for SOFI.
The Financial growth Metrics provide an analytics valuation approach to determining a reasonable SOFI stock forecast. The comparable companies' analysis determines a SOFI stock forecast by comparing SOFI's financial ratios to the average financial ratios of a group of similar stocks.
For this part of the analysis, I am looking at the history of key financial metrics for SoFi Technologies, Inc. to forecast the stock into 2022 and 2025. Most investors know that historical performance does not guarantee future performance, but it is useful to see how SOFI has been trending.
SOFI's current Earnings Per Share is -$0.49, however, their forward EPS for 2025 is $0.05. Furthermore, we have found SOFI's forward Price to Earnings Ratio is 118 (and we assume this remains the same). With all of this information, we determine the SOFI stock forecast for 2025 (by multiplying the P/E by the EPS) which gives us a stock price prediction of $5.9 per share (which is exactly what it is trading at right now).
There are other ways to predict the price for SOFI but I would argue that P/E, EPS, and Earnings Growth are the most commonly used financial metrics by analysts and investors. This is why I used them to forecast SOFI's stock price.
In order to undergo a comparable analysis, we need to outline SOFI's main competitors. These competitors need to have; a stock, valid financial ratios, operations similar to SOFI, and a market cap similar to SOFI (if possible).
By keeping this in mind, I found the following list of companies to be some of SOFI stocks closest competitors:
Overall, SOFI stock is overvalued and needs to experience a change in the stock price of (an average of) 77.16% to be considered “at fair value”. Applying this percentage change to SOFI's current price of $5.9 implies a forecasted price of $10.45/share.
Analyst Ratings have provided a relatively strong indicator of future price movement, which is why they are used to (hopefully) support our SOFI stock forecast. There are a total of 34 analyst ratings for SOFI, which are distributed as follows:
As you can see the majority of analysts have given the SOFI stock a "buy" rating, and the remaining analysts have given the SOFI stock a "hold" rating. The "hold" ratings imply that SoFi is at/near fair value (which we determined is true via our forward P/E and EPS Valuation). The "buy" ratings imply that the SOFI stock is undervalued, which we determined in our comparable company analysis.
Should you buy SOFI? Well, based on the overall SOFI stock forecast of $8.18 per share, and the current price of SOFI being $5.90/share, I would agree with the analysts and say SOFI is a buy. Let me know what you think, happy to dive into other aspects of SOFI to help you make an informed investment decision.