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small-cap

Time To Cash In on This NYSE-Listed Consumer Finance Play – ENVA

Nov 26, 2021 | Team Kalkine
Time To Cash In on This NYSE-Listed Consumer Finance Play – ENVA

 

Enova International, Inc.

ENVA Details

Enova International, Inc. (NYSE: ENVA) is a technology and analytics company that uses artificial intelligence and machine learning to provide online financial services. Its services consist of installment loans, line of credit accounts, receivables purchase agreements, income share agreements, credit access business (CSO) and bank programs. As of November 24, 2021, the company's market capitalization stood at USD 1.46 billion.

Latest News:

  • Share Repurchase Program: ENVA authorized a share repurchase plan for up to USD 150 million of its common shares on November 04, 2021. This new program replaces the existing USD 50 million repurchase program and will continue until December 31, 2022. ENVA had repurchased USD 23 million in common stock under the current program as of November 03, 2021.

Q3FY21 Results:

  • Double-Digit Growth in Revenue: The company reported a YoY surge of 35.55% in net revenues to USD 246.38 million in Q3FY21 (ended September 30, 2021) compared to USD 181.77 million in Q3FY20, driven by a higher average combined loan and finance receivable balance.
  • Decline in Net Income: ENVA reported a sharp reduction in net income (attributable to common shareholders) to USD 51.55 million in Q3FY21 vs. USD 93.67 million reported in Q3FY20, attributable to significantly increased marketing expenses (USD 79.73 million in Q3FY21 vs. USD 4.63 million in Q3FY20).
  • Dip in Adjusted EBITDA: ENVA recorded a fall in adjusted EBITDA to USD 99.57 million in Q3FY21 from USD 136.14 million in Q3FY20.

Key Risks:

  • Reliance on Lead Providers: Lead providers are critical to the business since they bring in new customers. As a result, the company's performance is dependent mainly on lead providers' or marketing affiliates' desire and capability to deliver customer leads at competitive prices.

Valuation Methodology: Price/Earnings Multiple Based Relative Valuation

(Analysis by Kalkine Group)

* % Premium/(Discount) is based on our assessment of the company's NTM trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

ENVA Daily Technical Chart (Source: REFINITIV)

Stock Recommendation:

ENVA's stock price has surged 81.95% in the past twelve months and is leaning towards the higher end of its 52-week range of USD 20.81 to USD 43.47. The stock is trading above its 50 and 200 DMA levels, and its RSI Index is at 59.01. We have valued the stock using the Price/Earnings multiple-based relative valuation methodology and arrived at a target price of USD 36.80.

Considering the significant uptick in the stock price and technical indicators, we believe the decent business fundamentals are adequately reflected at trading levels. Hence, we recommend a "Sell" rating on the stock at the closing price of USD 40.12, up 0.22% as of November 24, 2021.

* The reference data in this report has been partly sourced from REFINITIV.

* All forecasted figures and industry information have been taken from REFINITIV.