We use cookies to understand how you use our site and to improve your experience.
This includes personalizing content and advertising.
By pressing "Accept All" or closing out of this banner, you consent to the use of all cookies and similar technologies and the sharing of information they collect with third parties.
You can reject marketing cookies by pressing "Deny Optional," but we still use essential, performance, and functional cookies.
In addition, whether you "Accept All," Deny Optional," click the X or otherwise continue to use the site, you accept our Privacy Policy and Terms of Service, revised from time to time.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
OppFi's Paradox: Net Profit Strains Despite Operational Strength
Read MoreHide Full Article
Key Takeaways
OPFI's gross margin surged to 85.7% in 1Q25, reflecting ongoing improvements in operational efficiency.
AI-driven underwriting cut net charge-offs to 35% of revenues, down from 42% in the prior quarter.
Net profit margin fell to -2.8% due to rising minority interest expenses from OPFI's Up-C structure.
OppFi’s (OPFI - Free Report) trailing 12-month gross margin stood at 85.7% in the first quarter of 2025, increasing from the preceding quarter’s 84.7% and the year-ago quarter’s 82.3%. This uptrend has persisted since the March quarter of 2024. The trailing 12-month EBITDA margin was 57.5% in the first quarter of 2025, rising from the previous quarter’s 46.7% and the year-ago quarter’s 39.8%.
This upward trajectory testifies to OppFi’s operational efficiency, driven by AI-powered underwriting models that lowered net charge-offs as a percentage of revenues to 35% from the preceding quarter’s 42% and year-ago quarter’s 48%. Furthermore, the company’s ability to demonstrate disciplined expense management contributed to this efficiency.
However, this strong operational performance does not lead to an optimistic outlook for OppFi's net profit margin. Although the trailing twelve-month net profit margin rose from 1.5% in the first quarter of 2024 to 2.4% in the third quarter of 2024, it then plummeted to -2.8% during the recent March quarter. Why is there a sharp decline in net profit margin despite operational excellence? The reason is OPFI’s minority interest expense caused by its Up-C structure.
In this structure, a significant portion of the company’s consolidated earnings is allocated to non-controlling interests before any net income is attributable to shareholders. Despite this being an accounting requirement, it can negatively impact OPFI’s true profitability. For instance, during the first quarter of 2025, net income attributable to non-controlling interest was 156% of the net income, and this percentage has been increasing continuously since the year-ago quarter.
Whether the company can establish a positive trend in its profitability remains to be seen. OppFi’s ability to continually improve its credit quality, as shown by its lower net charge-off rate and rising auto-approval rates, should be the main driver over the long term. We expect these improvements to offset the dilutive effects of non-operating adjustments and minority interest over time. Refining lending models and reducing costs could potentially put the company on track to achieve a positive net income trend.
OPFI’s Price Performance, Valuation & Estimates
Shares of OppFi have skyrocketed 294.5% in the past year, significantly outperforming its competitors, Green Dot (GDOT - Free Report) and Remitly Global (RELY - Free Report) , and the industry as a whole. The industry has rallied 30.2%, whereas Green Dot and Remitly Global have gained 13.7% and 47.5%, respectively, in the same period.
1-Year Price Performance
Image Source: Zacks Investment Research
From a valuation standpoint, OPFI trades at a forward price-to-earnings ratio of 10.36, lower than the industry’s 22.72. Green Dot and Remitly Global trade at 7.95 and 109.62, respectively.
The Zacks Consensus Estimate for OppFi’s earnings for 2025 is pegged at $1.23 per share, suggesting 29.5% year-over-year growth. The same is anticipated to increase 14.2% year over year in 2026.
Image: Bigstock
OppFi's Paradox: Net Profit Strains Despite Operational Strength
Key Takeaways
OppFi’s (OPFI - Free Report) trailing 12-month gross margin stood at 85.7% in the first quarter of 2025, increasing from the preceding quarter’s 84.7% and the year-ago quarter’s 82.3%. This uptrend has persisted since the March quarter of 2024. The trailing 12-month EBITDA margin was 57.5% in the first quarter of 2025, rising from the previous quarter’s 46.7% and the year-ago quarter’s 39.8%.
This upward trajectory testifies to OppFi’s operational efficiency, driven by AI-powered underwriting models that lowered net charge-offs as a percentage of revenues to 35% from the preceding quarter’s 42% and year-ago quarter’s 48%. Furthermore, the company’s ability to demonstrate disciplined expense management contributed to this efficiency.
However, this strong operational performance does not lead to an optimistic outlook for OppFi's net profit margin. Although the trailing twelve-month net profit margin rose from 1.5% in the first quarter of 2024 to 2.4% in the third quarter of 2024, it then plummeted to -2.8% during the recent March quarter. Why is there a sharp decline in net profit margin despite operational excellence? The reason is OPFI’s minority interest expense caused by its Up-C structure.
In this structure, a significant portion of the company’s consolidated earnings is allocated to non-controlling interests before any net income is attributable to shareholders. Despite this being an accounting requirement, it can negatively impact OPFI’s true profitability. For instance, during the first quarter of 2025, net income attributable to non-controlling interest was 156% of the net income, and this percentage has been increasing continuously since the year-ago quarter.
Whether the company can establish a positive trend in its profitability remains to be seen. OppFi’s ability to continually improve its credit quality, as shown by its lower net charge-off rate and rising auto-approval rates, should be the main driver over the long term. We expect these improvements to offset the dilutive effects of non-operating adjustments and minority interest over time. Refining lending models and reducing costs could potentially put the company on track to achieve a positive net income trend.
OPFI’s Price Performance, Valuation & Estimates
Shares of OppFi have skyrocketed 294.5% in the past year, significantly outperforming its competitors, Green Dot (GDOT - Free Report) and Remitly Global (RELY - Free Report) , and the industry as a whole. The industry has rallied 30.2%, whereas Green Dot and Remitly Global have gained 13.7% and 47.5%, respectively, in the same period.
1-Year Price Performance
From a valuation standpoint, OPFI trades at a forward price-to-earnings ratio of 10.36, lower than the industry’s 22.72. Green Dot and Remitly Global trade at 7.95 and 109.62, respectively.
P/E - F12M
OPFI has a Value Score of A.
The Zacks Consensus Estimate for OppFi’s earnings for 2025 is pegged at $1.23 per share, suggesting 29.5% year-over-year growth. The same is anticipated to increase 14.2% year over year in 2026.
OPFI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.