OppFi (US:OPFI) ZACKSยท2025-07-10 12:35Core Insights - OppFi's gross margin increased to 85.7% in Q1 2025, up from 84.7% in the previous quarter and 82.3% a year ago, indicating a consistent upward trend since Q1 2024 [1][8] - The trailing 12-month EBITDA margin rose to 57.5% in Q1 2025, compared to 46.7% in the previous quarter and 39.8% a year ago, showcasing improved operational efficiency [1] - The company's net charge-offs as a percentage of revenues decreased to 35% from 42% in the prior quarter and 48% a year ago, attributed to AI-powered underwriting models [2] Operational Performance - Despite strong operational metrics, OppFi's net profit margin fell to -2.8% in Q1 2025, down from 1.5% in Q1 2024 and 2.4% in Q3 2024, primarily due to rising minority interest expenses linked to its Up-C structure [3][4] - The Up-C structure results in a significant portion of consolidated earnings being allocated to non-controlling interests, negatively impacting reported profitability [4] Future Outlook - The company's ability to improve credit quality, as evidenced by lower net charge-off rates and increasing auto-approval rates, is expected to drive long-term profitability [5] - Refining lending models and cost reduction strategies may help OppFi achieve a positive net income trend over time [5] Market Performance - OppFi's shares surged 294.5% over the past year, outperforming competitors Green Dot and Remitly Global, which gained 13.7% and 47.5% respectively, while the industry overall rose by 30.2% [6] - The forward price-to-earnings ratio for OppFi is 10.36, significantly lower than the industry's 22.72, indicating potential undervaluation [10] Earnings Estimates - The Zacks Consensus Estimate for OppFi's earnings in 2025 is $1.23 per share, reflecting a year-over-year growth of 29.5%, with an anticipated increase of 14.2% in 2026 [13]