Shares of SoFi Technologies (SOFI) are down more than 60% since the start of the year. The company announced poor financial results in the second quarter. So, instead of SOFI, we believe it may make sense to invest in fundamentally sound financial stocks Forrester (FORR) with significant upside potential. Continue reading….
Fintech SoFi Technologies, Inc. (SOFI) provides digital financial services. The stock has been losing momentum since the beginning of the year due to a turbulent market environment.
Its price has fallen 36.3% in the past six months and 60.5% since the start of the year to close the last trading session at $6.19. It is currently trading 74.7% below its 52-week high of $24.65, which it reached on November 11, 2021.
The fintech company reported disappointing financial results in the second quarter of fiscal 2022. SOFI’s net loss and loss per share were $95.84 million and $0.12, respectively. Additionally, as of June 30, 2022, its total liabilities were $7.16 billion, compared to $4.48 billion as of December 31, 2021.
Given the company’s weak financial position and growth prospects, SOFI is rated a strong sell in our proprietary rating system.
Therefore, investors should consider profitable financial services stocks Forrester Research, Inc. (FORR) instead of SOFI. With a market capitalization of $760.15 billion, FORR operates internationally as an independent research and advisory services firm. The Company operates through three segments: Research, Consulting and Events.
FORR posted strong results for the second quarter of fiscal 2022 and continued to deliver double-digit contract value growth, with revenue growth of 15% for the period. In addition, the company generated positive cash flow, which allowed it to invest more in marketing, sales and technology.
Given FORR’s strong financial results and confidence in its ability to manage costs, the company reiterated its full-year guidance for adjusted operating margin and EPS. The company now expects an adjusted operating margin of around 11.5% to 12.5% and adjusted earnings per share of $2.25 to $2.35.
The FORR has fallen 7% over the past month to close the last trading session at $40.05. However, Wall Street analysts expect the stock to reach the mid-price target of $65.00 in the near term, which represents a Upside potential of 62.3%.
Here’s what could influence FORR’s performance in the coming months:
During the second quarter of Fiscal 2022 ended June 30, 2022, FORR’s revenue increased 15.2% year-over-year to $148.25 million. The company’s operating profit was $20.70 million, up 58.2% year-on-year. Its profit before income taxes rose 71.6% from the prior year period to $20.27 million.
Additionally, the company’s adjusted net profit was $19.22 million, registering a year-on-year increase of 51.4%. Its adjusted EPS was up 51.5% from its value a year ago at $1.00. As of June 30, its cash, cash equivalents and marketable investments were $122.61 million.
Favorable analyst estimates
Analysts expect FORR’s revenue for fiscal year 2022 (ending December 2022) to be $540.98 million, a 9.4% increase over the reporting period. ‘last year. The current year EPS consensus estimate of $2.30 points to 10.1% year-over-year growth. The company has exceeded consensus revenue estimates in each of the past four quarters.
Additionally, FORR’s revenue for fiscal 2023 is expected to increase 8.1% year-over-year to $584.58 million. Analysts expect EPS for the year to rise 15.9% year-over-year to $2.67.
FORR’s trailing 12-month gross profit margin of 58.80% is 102.1% above the industry average of 29.10%. Its leveraged trailing 12-month FCF margin of 12.33% is 246.9% higher than the industry average of 3.55%. And the action is over 12 months ROCE and ROTC of 14.85% and 7.86% are above industry averages of 14.29% and 6.66%, respectively.
In 12-month PEG terms, the FORR is currently trading at 0.15x, 55.9% below the industry average of 0.33x. The stock’s 12-month EV/Sales multiple of 1.46 is 13.6% below the industry average of 1.69. Likewise, its 12-month price/cash flow of 10.60x compares to the industry average of 15.56x.
POWR ratings are promising
FORR’s overall A rating equates to a Strong Buy in our POWR Rankings system. POWR ratings are calculated by considering 118 separate factors, with each factor weighted to an optimal degree.
Our proprietary scoring system also rates each stock against eight distinct categories. FORR has an A rating for quality, in sync with its industry-leading profitability metrics. Additionally, it has an A rating for growth, in line with impressive revenue and profit growth estimates.
FORR is ranked #1 out of 107 stocks in the Financial Services (Corporate) industry.
Beyond what I said above, we also assigned FORR ratings for Sentiment, Value, Momentum, and Stability. Access all FORR assessments here.
FORR delivered impressive results in terms of revenue and profitability in its last quarter. And analysts are optimistic about the company’s revenue and earnings growth prospects. Additionally, the company reaffirmed its adjusted operating margin and EPS guidance for the full year.
Therefore, FORR appears to be a better investment than SOFI, which is rated F (Strong Sell) in our proprietary rating system.
FORR shares were flat in premarket trading on Friday. Year-to-date, the FORR is down -31.81%, compared to a -15.08% rise in the benchmark S&P 500 over the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using its fundamental approach to stock analysis, Mangeet seeks to help retail investors understand the underlying factors before making investment decisions.
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