Huge News for SoFi Investors

SoFi Technologies (NASDAQ: SOFI) is having a good few months. In recent weeks, the online bank and lending platform has added a new loan partner, recently reported strong third-quarter earnings, and is now adding robo-investing for customers.

The company keeps firing on all cylinders, adding more and more products to improve its value. In turn, this is leading to more customer growth.

The stock is up 35% in the last month and getting near the all-time highs set when its merger with a special purpose acquisition company (SPAC) was consummated in 2020. Should you buy after this recent run-up? Let's investigate SoFi's stock performance and find out.

Fast growth and improving profitability

Top-line results came in with more of the same in the third quarter. Total customers grew 35% year over year to 9.4 million, which was a record. Strong customer growth led to 30% adjusted net revenue growth in the quarter.

Problems for SoFi Technologies haven't stemmed from growth. Profitability has been the drag that is keeping the stock down. Management has reined in costs and improved its lending operations in recent quarters, which is leading to better profit figures. Net income was $61 million last quarter and $214 million over the past 12 months. It expects to generate over $200 million in net income in fiscal year 2024.

It is highly impressive that SoFi is able to post positive net earnings when it is still reinvesting so much for growth: over $200 million a month on marketing and $139 million on product development. These numbers should come down as a percentage of revenue as the business scales up even further, which will lead to even more profit.

Adding more products to the ecosystem

SoFi's value proposition to consumers is being a one-stop shop for all their financial needs. It offers consumer banking, savings, credit cards, investing, and even cryptocurrency trading. Aggregating all these services is important to separate itself from the competing consumer banks. Last quarter, it reached 13.65 million total products in use, another key metric for investors to track.

And this month, it just announced that it is adding a robo-advisory platform for customers. Robo-investing works as an automated financial advisory, charging a small fee for quantitative portfolio allocations. This is a popular product across the investing world and should help accumulate more assets for the SoFi platform.

On the lending side, the company just made a promising new deal with Fortress Investment Group to take on $2 billion of loans. SoFi does student, home, and personal loans, but wants to become more asset-light and sell these loans to third parties. A $2 billion deal with an investment group goes a long way in making this happen.

SOFI net income (TTM) data by YChart; TTM = trailing 12 months.

Is the stock a buy today?

SoFi has a market capitalization of $14.6 billion. If you just looked at its trailing price-to-earnings ratio (P/E) of 135, you would think the stock is overvalued. But you don't make money looking at the past, you make money betting on what will happen in the future.

Revenue is up 262% since the beginning of 2021. With customer growth showing no signs of slowing down, I think it is likely this revenue increase will continue unabated for the next few years. Net income is also muted due to the fact SoFi is investing so much in marketing and building new products.

Net income only just flipped positive for SoFi after years of losses. Don't underestimate its ability to keep scaling up earnings in the coming years. If the company can hit $1 billion in net income, the stock's P/E will fall to around 14.6, which is well below the market average. The stock will likely do quite well for shareholders in this scenario.

SoFi is not a risk-free investment; no stock is. But unlike other growth stocks that are trading at nosebleed prices at the moment, there still could be a lot of value to be had for investors who bought after last month's latest bump.

Should you invest $1,000 in SoFi Technologies right now?

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Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.