Loan Automation And Operational Efficiency Will Deliver Success

AN
AnalystConsensusTarget
Consensus Narrative from 2 Analysts
Published
15 Apr 25
Updated
17 Jul 25
AnalystConsensusTarget's Fair Value
AU$0.099
72.6% undervalued intrinsic discount
17 Jul
AU$0.027
Loading
1Y
-15.6%
7D
0%

Author's Valuation

AU$0.1

72.6% undervalued intrinsic discount

AnalystConsensusTarget Fair Value

Last Update01 May 25
Fair value Increased 9.44%

Key Takeaways

  • Strong loan origination growth and strategic investments are expected to drive future revenue and profitability.
  • Automation and operational improvements will enhance efficiencies, reducing costs and contributing to improved net margins.
  • The company's profitability is at risk due to macroeconomic conditions, competitive pricing pressures, and potential execution challenges in technological automation.

Catalysts

About Wisr
    Engages in the lending business in Australia.
What are the underlying business or industry changes driving this perspective?
  • Wisr has experienced strong loan origination growth, with guidance for FY '25 upgraded to 90%+ from an earlier 75% estimate. An increase in loan origination growth supported by structural sector tailwinds is expected to drive future revenue growth.
  • The company's significant investment in automation, achieving almost 80% automatic credit approval, points to potential operational leverage which should improve net margins by reducing costs as the business scales.
  • Improvements in credit decision automation and arrears management systems signal enhancements in process efficiencies, which are expected to contribute to reduced future losses, benefiting net margins.
  • Wisr's well-capitalized position with significant unrestricted cash and warehouse capacity should support continued loan book growth, leading to revenue growth and enhanced profitability.
  • Strategic investments in a third warehouse and funding capabilities, along with strong portfolio yield and net interest margin (NIM), are expected to underpin efforts to scale the business profitably and target cash NPAT positivity in the short term, impacting earnings.

Wisr Earnings and Revenue Growth

Wisr Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Wisr's revenue will grow by 98.0% annually over the next 3 years.
  • Analysts are not forecasting that Wisr will become profitable in next 3 years. To represent the Analyst Price Target as a Future PE Valuation we will estimate Wisr's profit margin will increase from -42.1% to the average AU Consumer Finance industry of 12.4% in 3 years.
  • If Wisr's profit margin were to converge on the industry average, you could expect earnings to reach A$21.0 million (and earnings per share of A$0.01) by about July 2028, up from A$-9.2 million today.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.5x on those 2028 earnings, up from -4.1x today. This future PE is lower than the current PE for the AU Consumer Finance industry at 12.2x.
  • Analysts expect the number of shares outstanding to grow by 1.38% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 11.61%, as per the Simply Wall St company report.

Wisr Future Earnings Per Share Growth

Wisr Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • The slight decline in portfolio NIM due to the roll-off of favorable hedges could impact future net margins and profitability if hedging costs increase.
  • The business is exposed to general macroeconomic conditions, including potential geopolitical uncertainties and interest rate fluctuations, which could impact demand and, consequently, future revenue.
  • There is a risk that increased competition and pricing pressures in the lending market could lead to the need to reprice products, potentially affecting net interest margins and revenues.
  • Although the loan book is growing, the necessity for maintaining strong credit quality could result in increased operational costs, which may affect net margins and earnings if not managed efficiently.
  • The anticipated growth and reliance on automation may lead to execution risk if technological implementations do not deliver expected efficiencies, thus impacting operational leverage and profitability.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of A$0.098 for Wisr based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of A$0.13, and the most bearish reporting a price target of just A$0.07.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be A$169.5 million, earnings will come to A$21.0 million, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 11.6%.
  • Given the current share price of A$0.03, the analyst price target of A$0.1 is 72.6% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Read more narratives