DAVE's CashAI: Is This Underwriting Engine a Fintech Game-Changer?

Dave Inc.’s DAVE CashAI, a proprietary underwriting engine, is turning out to be a critical differentiator and a potential game-changer within fintech. Several metrics mentioned by management display the strength that this product holds. In the first quarter of 2025, the company’s adjusted EBITDA registered a whopping 235% year-over-year surge.

Dave also witnessed a 67% year-over-year surge in its non-GAAP variable profit, with the variable margin reaching 77%, up 950 basis points. The credit for such a remarkable performance goes to CashAI’s ability to enhance DAVE’s cost management activity, boosting its profit margin.

Moving past these metrics, the efficacy of the CashAI underwriting engine is reflected in the strong engagement with ExtraCash originations, which rose 46% year over year to more than $1.5 billion. Despite a seasonally soft quarter, CashAI was able to profitably underwrite larger numbers of Dave members for higher ExtraCash approval amounts.

CashAI significantly improved the company’s credit performance. DAVE reported a 33-basis-point or 18% year-over-year improvement in its 28-day delinquency rate, over which a 46% expansion was observed in ExtraCash originations. The underwriting engine leveraged insights and performance data to reduce the percentage of provision for credit losses to originations to 0.69% from the year-ago quarter’s 0.94%.

We anticipate CashAI to bear more fruits for the company as the training data set expands. With more training data, DAVE will be able to identify and indulge in good risk, maximizing approval, offering amounts for members and acting as a moat. This underwriting engine, enabling real-time credit risk identification via fully automated bank account transaction data analysis, challenges traditional lending models. The precision with which it manages delinquency and loss rates while enhancing profitability hints at a disruptive shift. This allows the company to offer access to financial solutions better than the fintech players that rely on slower and less agile underwriting methods.

DAVE’s Price Performance, Valuation & Estimates

The stock has skyrocketed 456% in the past year, significantly outperforming its competitors CoreCard CCRD and Loop Industries LOOP, and the industry as a whole. The industry and CoreCard soared 52.3% and 79.1%, respectively. Loop Industries declined 33.1% in the past year.

1-Year Price Performance

Even in the past three months, Dave has surged 150.9%, outperforming industry, CoreCard and Loop Industries’ 16.8%, 28.5% and 40% growth, respectively.

3-Month Price Performance

From a valuation standpoint, DAVE trades at a forward price-to-earnings ratio of 21.03, below the industry’s 24.73. It carries a Value Score of F.

The Zacks Consensus Estimate for Dave’s earnings for 2025 has increased 33.8% over the past 30 days.

DAVE currently has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

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

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