Will this Small Cap See Big Gains? Exploring OppFi (OPFI)

By Mijuško Šibalić, Stock Market Writer and Stock Researcher

December 30, 2024 11:30 PM UTC

Will this Small Cap See Big Gains? Exploring OppFi (OPFI)

Small-cap stocks generally receive much less coverage, both from media outlets and Wall Street researchers. But our proprietary quant rating system does not discriminate based on market cap — and you’d be surprised by how many small businesses receive high ratings.

Let’s take a closer look at one such small-cap stock: OppFi (NYSE: OPFI).

OppFi is a small-cap fintech company focused on providing small, short-term loans to underbanked populations. At present, it has a market capitalization of around $644.88 million.

Here’s where it gets interesting. Since January 1, the price of OPFI has gone up by 58.47% — although its yearly high in late November saw prices increase to a level 72.88% higher than at the start of the year.

Here’s where it gets even more interesting. Not only is OPFI the second highest-rated stock we track in the credit services industry, but it also carries a Zen Rating of A — on average, stocks with that distinction provide an average annual return of 32.52%.

Although it enjoys solid component grade ratings across the board, OppFi’s Sentiment rating is a particularly strong suit.

Why? The company’s latest earnings report might have something to do with it. While consensus estimates from analysts had earnings per share (EPS) pegged at $0.21, OppFi delivered $0.33. In fact, that Q3 earning call marked the seventh consecutive instance of OppFi beating earnings estimates — and three quarters in a row of beating revenue forecasts.

Also noteworthy? In every 2024 earnings call the company has held, it has raised guidance. This suggests that the business's growth momentum has significantly outpaced internal expectations.

However, we’d be remiss not to mention valuation and growth forecasts. At a P/E ratio of 25.48x, OPFI stock is quite affordable, particularly when you remember that the wider market average is 31.45x P/E ratio and that the credit services industry average is only slightly better than that, at 30.71x. Better yet, it isn’t just affordable on a relative basis, but on an absolute one as well — at the time of writing, the price of a single OPFI share was just $7.51.

In terms of valuation, the price-to-earnings growth (PEG) ratio is even more appealing at just 0.18x. That’s quite the rare sight — but it comes as little surprise once you take a look at growth forecasts. The company’s revenues are forecast to grow 69.71% per year — while an even more impressive earnings growth of 177.42% per year is expected.

These forecasts blow both wider market and industry averages out of the water. And it isn’t even particularly close.

One key catalyst that could provide a significant tailwind for OPFI stock in 2025 is rate cuts. Although the Federal Reserve announced that it would make fewer cuts than previously expected in the coming year, this macroeconomic change still stands to benefit the business, as demand for lending will increase.

In addition, per the Federal Deposit Insurance Corporation’s (FDIC) 2023 survey, roughly 5.6 million households in the United States remain completely unbanked, to say nothing of the significant underbanked population. This means there is potentially still a substantial portion of Oppfi’s “target audience” that has not yet been reached.

—> Click here to research OPFI. If you’d like to find other stocks poised to deliver outsized returns, our forecast high-growth stocks screener can be a good starting point.

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