SoFi Technologies (SOFI) is back in focus after its second quarter earnings, where strong revenue, rising member numbers, and a higher full year sales outlook met with a cautious market reaction.

SoFi Technologies’ recent Q2 earnings beat and higher full year revenue outlook came against a weak share price backdrop, with the stock down 40.6% on a year to date share price return while the 3 year total shareholder return is still 71.68%.

If SoFi’s volatility has you thinking about diversification, this could be a good moment to scan a wider set of fintech and financial app peers using our screener of 18 top founder-led companies

SoFi Technologies is posting stronger revenue and profit figures while the share price has fallen sharply this year. Is that gap telling you something about the business, or mostly about shifting sentiment around the stock’s valuation?

Most Popular Narrative: 29% Undervalued

SoFi Technologies closed at $16.31, while the most widely followed narrative on the stock pins fair value much higher at $22.98. That gap rests on a very specific view of how SoFi’s business mix and economics play out over time.

To find the intrinsic value, we use two models. Scenario Analysis (The Multiples)

Discounted Cash Flow (DCF) Modeling A DCF is a mathematical formula used to figure out what a company is worth today based on the cash it will make in the future.

Want to see what sits behind that $22.98 fair value? The narrative refers to expanding earnings, firm revenue growth and healthy margins to explain a higher future valuation multiple.

Result: Fair Value of $22.98 (UNDERVALUED)

However, this SoFi Technologies narrative still faces key risks, including a shift in credit quality that pressures profits and weaker demand for its technology platform services.

Another View on SoFi Technologies' Valuation

The popular SoFi Technologies narrative argues the stock is 29% undervalued with a fair value of $22.98. Our SWS DCF model points a different way. It puts future cash flow value at $13.98 per share, which suggests the stock appears expensive at the current $16.31. Which perspective do you think aligns with your risk tolerance?

Next Steps

If the mixed signals around SoFi Technologies leave you unsure, this is a good time to move fast and weigh the data for yourself. To see what investors are finding encouraging, start with the 2 key rewards.

Looking for more investment ideas beyond SoFi Technologies?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.