Strong analysis of the underwriting/marketing dual-lever risk. The reactor analogy is apt, especially for a lending business where capital efficiency cuts both ways. The gap betwen 19.9x P/E and 33.6x P/FCF tells the whole story - if receivables quality holds, that spread compresses fast. If not, the market already priced in the skepticism. Watching that 2.5-2.75% credit provison target will be key.
You nailed it, my friend. That gap between the P/E (19.9x) and P/FCF (33.6x) is essentially the 'Trust Tax' the market is charging right now.
As you said, if the receivables quality holds and they hit that 2.5%–2.75% target, the cash flow will catch up to the earnings very quickly. If not, the P/E is just a mirage. Thanks for reading.
You are spot on. I realized I left that section out of the final publish. My mistake!
I just updated the article with the full breakdown, but the headline number is an ROE of ~74% and ROCE of ~52%. It paints a picture of extreme capital efficiency, but as you likely know, high returns on low equity can be a double-edged sword if credit turns.
Appreciate that! It’s a complex story under the hood, but the valuation gap makes it worth the work. Hope the deep dive saves you some time on your own analysis.
Great piece! Sezzle is also a stock I’m looking into. I have a question: what’s your take on the long-term prospects of the sector? Also, what’s your opinion of the founder? He often quotes Warren Buffett, and at this point I’m not sure whether that’s a green or a red flag.
Thanks! Well, usually, when a fintech CEO quotes Warren, I check for my wallet. It’s often a distraction.
But with Charlie, I lean green flag, because actions speaks louder than words. Quoting Buffett is free; buying back stock and pivoting to real GAAP profits takes actual discipline.
He seems to read the math parts of the annual letters, not just the quotes.
As for the sector: The 'Wild West' land grab is over. The survivors won't be the ones with the most loans, but the ones creating habits (subscriptions).
Strong analysis of the underwriting/marketing dual-lever risk. The reactor analogy is apt, especially for a lending business where capital efficiency cuts both ways. The gap betwen 19.9x P/E and 33.6x P/FCF tells the whole story - if receivables quality holds, that spread compresses fast. If not, the market already priced in the skepticism. Watching that 2.5-2.75% credit provison target will be key.
You nailed it, my friend. That gap between the P/E (19.9x) and P/FCF (33.6x) is essentially the 'Trust Tax' the market is charging right now.
As you said, if the receivables quality holds and they hit that 2.5%–2.75% target, the cash flow will catch up to the earnings very quickly. If not, the P/E is just a mirage. Thanks for reading.
Good one, can help to cover the ROIC & ROE numbers analysis as well?
You are spot on. I realized I left that section out of the final publish. My mistake!
I just updated the article with the full breakdown, but the headline number is an ROE of ~74% and ROCE of ~52%. It paints a picture of extreme capital efficiency, but as you likely know, high returns on low equity can be a double-edged sword if credit turns.
Appreciate the heads-up!
Thanks mate, great write-up👍 just saw these posts today, not aware about sezl started analysing from my end too.
Appreciate that! It’s a complex story under the hood, but the valuation gap makes it worth the work. Hope the deep dive saves you some time on your own analysis.
Great piece! Sezzle is also a stock I’m looking into. I have a question: what’s your take on the long-term prospects of the sector? Also, what’s your opinion of the founder? He often quotes Warren Buffett, and at this point I’m not sure whether that’s a green or a red flag.
Thanks! Well, usually, when a fintech CEO quotes Warren, I check for my wallet. It’s often a distraction.
But with Charlie, I lean green flag, because actions speaks louder than words. Quoting Buffett is free; buying back stock and pivoting to real GAAP profits takes actual discipline.
He seems to read the math parts of the annual letters, not just the quotes.
As for the sector: The 'Wild West' land grab is over. The survivors won't be the ones with the most loans, but the ones creating habits (subscriptions).
That’s why I like the Sezzle pivot here.
Great answer! Thanks sharing!