San Francisco’s NerdWallet, Inc. (NRDS) operates a digital platform that provides consumer-driven advice about personal finance by connecting individuals and small- and mid-sized businesses with financial products providers. The company's shares jumped 48% in price in their stock market debut on Nov. 4, 2021. The company sold 7.25 million shares at $18—the midpoint of its proposed $17 - $19 range—raising $130.5 million. However, the stock has declined 54.6% in price since it started trading.

NRDS shares have slumped 16.2% over the past month to close yesterday’s trading session at $12.84. But Wall Street analysts’ $31.14 median price target indicates a potential 142.5% upside from its last closing price. NRDS stock now has an $845.32 million market capitalization. 

“NerdWallet’s $73 billion global total addressable market is massive with secular tailwinds from offline-to-online shifts. We believe that NerdWallet is well-positioned to capture market share across the different verticals,” said Bank of America analyst Nat Schindler. But Morgan Stanley’s James Faucette offered a less optimistic view of the company. He initiated the stock with an equal weight rating and $24 price target, citing cyclicality and margin implications of sales and marketing spending.

So, here is what could shape NRDS’s performance in the near term:

Bleak Financial Position

NRDS’ trailing-12-month revenue came in at $336.80 million. However, its trailing-12-month operating income stood at a negative $25.50 million, while its net income was negative $38 million. In addition, its trailing-12-month EPS was negative $0.41. And its trailing-12-month EBITDA and net operating cash flow amounted to negative $3.50 million and $5.30 million, respectively.

Mixed Valuation

In terms of forward EV/Sales, NRDS is currently trading at 2.37x, which is 6.7% lower than the 2.54x industry average. However, its 2.30 forward Price/Sales ratio is 30.6% higher than the 1.76 industry average. Also, NRDS’s 3.56x forward Price/Book is 29.2% higher than the 2.76x industry average.

Mixed Profitability

NRDS’ 91.95% gross profit margin is 77.4% higher than the 51.82% industry average. However, its 1.04% and 11.28% respective EBITDA and net income margins are substantially lower than the 21.93% and 5.73% industry averages. Also, its levered FCF margin is 96.8% lower than the 11.40% industry average. But its 11.69% ROE is 24.8% higher than the industry average.

POWR Ratings Reflect Uncertainty

NRDS has an overall C rating, which translates to Neutral in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

The stock has a grade of C for Value, consistent with its mixed valuation.

NRDS also has a D grade for Momentum. The stock’s substantial decline since its market debut justifies this grade.

Of 53 stocks in the Consumer Financial Services industry, NRDS is ranked #18.

Beyond what I have stated above, one can also view NRDS’ grades for Quality, Growth, Sentiment, and Stability here.

View the top-rated stocks in the Consumer Financial Services industry here.

Bottom Line

NRDS’ solid customer base and industry tailwinds should help the company generate stable returns over the long term. However, the lack of historical data makes it difficult for an average investor to analyze a company’s near-term prospects, which could foster volatility in the stock. Despite analysts’ positive sentiments around the stock, investor pessimism is evident. Furthermore, the company’s bleak financials are concerning. Thus, we think it could be wise to wait for a better entry point in the stock.

How Does NerdWallet, Inc. (NRDS) Stack Up Against its Peers?

While NRDS has an overall POWR Rating of C, one might want to consider taking a look at its industry peers Atlanticus Holdings Corporation (ATLC), OneMain Holdings, Inc. (OMF), and 360 Finance, Inc. (QFIN), which have a B (Buy) rating.

NRDS shares were unchanged in premarket trading Friday. Year-to-date, NRDS has declined -17.43%, versus a -6.42% rise in the benchmark S&P 500 index during the same period.

Subhasree’s keen interest in financial instruments led her to pursue a career as an investment analyst. After earning a Master’s degree in Economics, she gained knowledge of equity research and portfolio management at Finlatics.

More...