SoFi Technologies (SOFI)

The methods disagree: one places the value today above the price ($18) and the other below.

Today — expensive, no margin of safety: at $18 trades ~4.2% above its value discounted to today (~$17); the expected return does not even reach the risk-free rate (4.5%).

At 5 years — Preserva valor: the target price ($22) plus dividends yield just enough to preserve nominal capital, below the required 4% floor.

The bridge: the return at 5 years falls below the risk-free rate (4.5%) — which is why there is not even a discount to today's value. To require a 15% annual return, it would need to be bought at ~$11.

Educational / informational. Does not constitute investment advice.

The inverse approach: instead of projecting growth to obtain the value, the market price ($18) is taken as given and it solves for what annual owner-earnings growth would need to hold for 5 years for the present value —at the method's rate (4.5%, no-growth terminal)— to equal that price. It is the disconfirmation test: the expectations the price already pays for, contrasted against the method's projection.

The market discounts less growth (14.1%/year) than we project (34.0%/year) → if the base case holds, there is margin: perception is more pessimistic than the estimated reality.

That growth implies ~$1.2 bn of owner earnings in year 5 (vs ~$2.6 bn of our base case). It recalculates if the DCF assumptions are edited.

A bank is valued on equity (P/E × common earnings + price/tangible book), not EV: deposits and debt are funding. It returns capital via dividend + buyback —the buyback reduces the share count, so earnings per share grow faster than aggregate earnings—. Total return adds the dividend collected along the way. In edit mode, the metric, shares, dividend, and exit multiple can be adjusted.

Year 0 = TTM as of Jun 30, 2026 (revenue US$4,306 million, common net income ~US$596 million). Year 1 anchors on the raised guidance from Jul 29, 2026 (adjusted revenue US$4,750-4,850 million, +32-35% year-over-year, adjusted EBITDA ~US$1,600 million at a 33-34% margin, adjusted net income ~US$825 million at a 17% margin, adjusted EPS ~US$0.60). Revenue growth decelerates geometrically from 40.8% (TTM) to 12% by year 5, while the common net income margin expands from 13.8% to 23% via operating leverage. Diluted shares keep growing from stock-based compensation, but at a decreasing pace (8% to 2.5% annually), mirroring the decline in stock-based compensation expense from 19% to 6.6% of revenue since 2022. No dividends or buybacks: all earnings are retained and compound tangible book value per share.

Today's multiple compresses on its own going forward as the metric per share grows (accelerated by the buyback, which reduces the share count). The exit multiple at 3 years is higher than the terminal at 5 years —at 3 years there is more growth still ahead—. Total return adds the dividend collected; the required return is applied to the base scenario.

They are valued separately, with their own rationale, and are not incorporated into the base or the verdict (they are excess return). When assigning them value — in Editmode —, the total with optionalities updates live, without moving the base.

The verdict, the base CAGR, and the margin of safety are always calculated on the base; optionalities do not alter them (with optionalities at $0 they do not move).

Each card fixes a required annual return and answers: if the business is worth $22 in 5 years, what is the maximum that can be paid today to obtain that return? Since it now trades at $18, the margin of safety is how much cheaper the market is than that maximum. The three thresholds: 4% covers inflation (the floor), 10% is the long-term average return, and 15% is the level of a great investment.

With a target price of $22 in 5 years and a required return of 4.5% annually, the maximum to pay today is $17. Against the current market price ($18), the margin of safety is -4.2% (trades above the maximum → a premium is paid) and the total return at that price would be 3.6% annually.

• Entry multiple. The TTM P/E of approximately 41×× far exceeds the bank archetype's 10-15x band.
• Tangible book value. The P/TBV of approximately 2.5x is high for a bank, consistent with growth but demanding.
• Margin of safety. No margin of safety: at this price capital is preserved, but it is not bought below its value.

• Cash generation. GAAP operating cash flow is negative due to the growth of the retained loan book; real free cash flow depends on securitizations and portfolio sales.
• Sustainably high ROTCE. Current ROTCE (~6%) is below the 10% bar, though it improves with the growth of common net income.
• Reinvestment runway. Deposit growth, product cross-buy, and the Loan Platform Business offer a wide runway within the 15.8-million-member base.

Annual levels from the official filing (10-K); the % over each bar is the year-over-year (YoY) growth vs the prior year.

The four indicators show SoFi's growth engine: the member and product base is growing above 35% year-over-year, sustaining the cross-sell 'loop'; deposits already fund more than 90% of the balance sheet, lowering the cost of funding versus transitory wholesale funding; and the net interest margin (NIM) stays stable around 5.8-6.0% despite the loan book's strong growth.

The % are the annual (year-over-year) growth: each year —historical and projected— vs the prior one; the TTM (trailing 12m) vs the TTM of a year ago, to avoid overlapping windows. The historicals are exact figures from the official filings; the projected years come from the year-by-year model (the intermediate years without their own series are interpolated between the anchors). The projected columns (+1y…+5y) are 12-month windows counted from the TTM close (30-jun-2026): the projection starts from the most recently reported data, not the fiscal year. The projected base is realistic and unbiased — the risk discount is applied at the end, via the required return. The rationale for each metric is in the (i).

• Member growth. 15.8 million members as of Q2 2026, +35% year-over-year, with a record 1.1 million net additions in the quarter.
• Cross-buy. 51% of new products come from existing members, sustaining the cross-sell 'loop.'
• Expected deceleration. 2026 guidance implies revenue growth decelerating from the current 40.8% to 32-35% annually.

• Recurrence and predictability. Deposits, loans, and technology subscriptions generate recurring revenue, though part of the growth depends on active cross-selling.
• Differentiated product vs. commodity. The integrated app reduces friction, but the 10-K itself admits rivals have greater scale and resources.
• Operating leverage. The adjusted EBITDA margin rose from 28% to 30% in one year and full-year guidance targets 33-34%, showing real leverage over the cost base.
• Behavior through the cycle. The consumer credit business is cycle-sensitive; SoFi has not yet gone through a real credit recession with its current book.

• ✓Capital adequacy (CET1)CET1 18.7% (+11.7pp above the minimum)
• ✓Reserve coverage (allowance / loan book)4.24% of the loan book
• ✕Credit quality (net charge-off rate)2.62% annually
• ✕Value creation (ROTCE − 10% bar)-4pp
• ✓Funding (deposit base)Deposits $45.5 bn

A traffic-light interpreted by the method (not generic): float (negative WC) adds up, capex is judged by incremental ROIC (malinvestment test), and a lender is not subjected to corporate solvency. The (i) shows the derivation of each number.

ⓘ Has a loan book: credit health (delinquency, coverage, normalized CECL, RoA/RoE) is evaluated separately, not with corporate solvency.

• Regulatory capital. Consolidated CET1 of 18.7% versus a 7.0% regulatory minimum (wide margin), well above the threshold.
• Credit quality. The personal loan charge-off rate fell to 2.62% and the student loan rate to 0.61%, both improving year-over-year.
• Funding. Deposits already account for more than 90% of total funding, replacing more expensive transitory wholesale funding.

How cash comes in and how it is deployed. In green, the business's own cash (the owner-FCF it generates and reinvests); in gray, the float and credit — customer and funding money, which is not the shareholder's.

SoFi retains 100% of earnings to fund balance-sheet growth (deposits and loans) and small bolt-on acquisitions (Composer and Peach in 2026); it pays no dividends and does not buy back shares, with stock-based compensation —not cash— as the main source of dilution.

Who owns the shares — the alignment and whether there is a controlling shareholder.

• Capital allocation. Retains 100% of earnings to fund balance-sheet growth and small bolt-on acquisitions, with no dividends or buybacks.
• Alignment. CEO Anthony Noto owns 1.9% of shares outstanding and the leadership group 2.5%: a real but moderate stake versus Vanguard and BlackRock.
• Dilution from stock-based compensation. Diluted shares grew 8% over the last twelve months, though stock-based compensation expense falls from 19% to 6.6% of revenue.

• The 44% plunge from the 52-week high occurred on the very day of results that beat consensus on revenue (+43%), adjusted EBITDA (+44%), and earnings per share (+50%): the market interpreted that maintaining full-year guidance without raising it in the same proportion as the quarterly beat signals a possible slowdown or margin compression in the second half — a case of a motivated seller reacting to disappointed expectations, not to business deterioration.
• The recent history of GAAP losses (through Q4 2023) and the novelty of operating as a regulated bank holding company generate persistent skepticism about the durability of profitability, despite four consecutive quarters of GAAP net income.
• Even after the drop, the current multiple (TTM P/E of approximately 41×× on common net income) remains far above the 10-15x band of a disciplined bank, suggesting the price does not reflect a clear opportunity from motivated sellers or missing buyers, but rather still incorporates a substantial growth premium.

There is no unambiguous source of discount: the post-results plunge fits partially with a motivated seller reacting to short-term expectations, but the entry multiple remains that of a growth stock, not that of a cheap bank — valuation discipline calls for caution before calling it a clear opportunity.

The annual return (CAGR at 5 years) in each scenario, with the total period return below — the margin of safety made visual: upside range wide, downside range narrow.

Even in the bear scenario, the return holds at -14%/year (-53% total): the margin of safety protects the downside. The bull (+13%/year, +88% total) exceeds it comfortably — a favorable asymmetry, with a narrow downside range and a wide upside range.

• Buyer concentration. Loan sales depend on a concentrated number of wholesale buyers and Loan Platform Business counterparties.
• Technology concentration. Galileo/Technisys already lost a significant customer to a competitor, according to the 10-K itself.
• Crypto regulation. The GENIUS Act framework requires OCC approval for SoFi Bank to issue SoFiUSD, with risk of future restriction.
• Credit cycle. A macro deterioration would raise charge-offs right as the loan book grew strongly in 2025-2026.

Each thinker's analytical framework applied to our data.

• Buffett / GrahamQuality + margin of safety

  Fails the quality gate: ROTCE 6% does not clear the 10% bar.

• Peter LynchGrowth at a reasonable price (GARP)

  A hyper-growth growing 34% at a PEG of 1.2 → reasonable for its growth.

• Joel GreenblattCheap and high-return (Magic Formula)

  Not applicable — the Magic Formula excludes financials and regulated businesses (EBIT/EV does not capture the operating leverage).

• Howard MarksPerception vs reality + cycle

  The price discounts 14% vs our 34%: perception is more pessimistic than reality, with an identified source of the discount.

• Seth KlarmanCapital protection (bear scenario)

  Bear-scenario floor -14%/yr over 5y (material loss) → risk of permanent capital loss.

• Pat DorseyMoat strength (Five Rules)

  A narrow moat, stable; sources: cost advantage, efficient scale, switching costs, intangibles → partially passes the Five Rules.

• Aswath DamodaranExpectations implied by the price

  Justifying the price requires discounting 14%, within what we project (34%) — the story squares with the numbers.