OPFI's Net Charge-Off Rates Decline: A Win for Risk Management?

OppFi’s OPFI net charge-offs as a percentage of total revenues indicate the proportion of the company's top line that has been offset by uncollectible loans after accounting for any recoveries. A lower percentage signals enhanced credit quality and better risk management.

In the first quarter of 2025, OppFi demonstrated a positive trend in this performance indicator. OPFI reported a net charge-off rate of 35% that declined 700 basis points (bps) from the preceding quarter and 1300 bps from the year-ago quarter. This rampant reduction in the metric is partly due to Model 6, which was designed to identify the risks of long-term charge-offs more efficiently than the earlier versions that aimed at upfront shorter-term repayment status.

This model allows the company to improve its capacity to identify and target higher-quality borrowers. By leveraging insights into repayment behaviors, OPFI can extend credit to individuals with a greater likelihood of repayment, even within the underserved market. This strategy, combined with enhanced risk assessment throughout the entire loan lifecycle, enables dynamic adjustments and early intervention.

OPFI’s loan recovery efforts are crucial in minimizing the ultimate loss on defaulted loans through effective collection strategies. Together, these factors have played a significant role in decreasing the occurrence of non-performing loans and maximizing recoveries, thus reducing net charge-offs.

In the first quarter of 2025, adjusted net income skyrocketed 285.1% year over year to $33.8 million. This improvement in profitability stems from OppFi’s enhanced credit quality, indicated by the reduction in net charge-off rates, which supports a higher retained proportion of the top line.

The sustainability of OppFi’s business model is reinforced by this trend, paving the way for responsible growth and expansion in the underserved credit market, which demonstrates that financial returns can grow exponentially under the garb of effective risk management strategies.

OPFI’s Price Performance, Valuation & Estimates

The stock has soared 252.9% in the past year, significantly outperforming its competitors, Paysign PAYS, Shift4 Payments FOUR and the industry as a whole. The industry rallied 25.6%. Paysign and Shift4 Payments have observed 24.6% and 25.2% growth, respectively.

1-Year Price Performance

From a valuation standpoint, OPFI trades at a forward price-to-earnings ratio of 9.32, lower than the industry’s 22.58. Paysign and Shift4 Payments trades at 15.59 and 14.76, respectively. OppFi has a Value Score of A, whereas Shift4 Payments and Paysign have a Value Score of C and D, respectively.

The Zacks Consensus Estimate for OppFi’s earnings for 2025 has increased 15% over the past 60 days.

OPFI currently flaunts 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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