OppFi's Paradox: Net Profit Strains Despite Operational Strength

OppFi’s OPFI trailing 12-month gross margin stood at 85.7% in the first quarter of 2025, increasing from the preceding quarter’s 84.7% and the year-ago quarter’s 82.3%. This uptrend has persisted since the March quarter of 2024. The trailing 12-month EBITDA margin was 57.5% in the first quarter of 2025, rising from the previous quarter’s 46.7% and the year-ago quarter’s 39.8%.

This upward trajectory testifies to OppFi’s operational efficiency, driven by AI-powered underwriting models that lowered net charge-offs as a percentage of revenues to 35% from the preceding quarter’s 42% and year-ago quarter’s 48%. Furthermore, the company’s ability to demonstrate disciplined expense management contributed to this efficiency.

However, this strong operational performance does not lead to an optimistic outlook for OppFi's net profit margin. Although the trailing twelve-month net profit margin rose from 1.5% in the first quarter of 2024 to 2.4% in the third quarter of 2024, it then plummeted to -2.8% during the recent March quarter. Why is there a sharp decline in net profit margin despite operational excellence? The reason is OPFI’s minority interest expense caused by its Up-C structure.

In this structure, a significant portion of the company’s consolidated earnings is allocated to non-controlling interests before any net income is attributable to shareholders. Despite this being an accounting requirement, it can negatively impact OPFI’s true profitability. For instance, during the first quarter of 2025, net income attributable to non-controlling interest was 156% of the net income, and this percentage has been increasing continuously since the year-ago quarter.

Whether the company can establish a positive trend in its profitability remains to be seen. OppFi’s ability to continually improve its credit quality, as shown by its lower net charge-off rate and rising auto-approval rates, should be the main driver over the long term. We expect these improvements to offset the dilutive effects of non-operating adjustments and minority interest over time. Refining lending models and reducing costs could potentially put the company on track to achieve a positive net income trend.

OPFI’s Price Performance, Valuation & Estimates

Shares of OppFi have skyrocketed 294.5% in the past year, significantly outperforming its competitors, Green Dot GDOT and Remitly Global RELY, and the industry as a whole. The industry has rallied 30.2%, whereas Green Dot and Remitly Global have gained 13.7% and 47.5%, respectively, in the same period.

1-Year Price Performance

From a valuation standpoint, OPFI trades at a forward price-to-earnings ratio of 10.36, lower than the industry’s 22.72. Green Dot and Remitly Global trade at 7.95 and 109.62, respectively.

P/E - F12M

OPFI has a Value Score of A.

The Zacks Consensus Estimate for OppFi’s earnings for 2025 is pegged at $1.23 per share, suggesting 29.5% year-over-year growth. The same is anticipated to increase 14.2% year over year in 2026.

OPFI currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

This article originally published on Zacks Investment Research (zacks.com).

Zacks Investment Research