Is Upstart a Hidden Opportunity After Its Recent 21% Price Surge?

• Ever wondered if Upstart Holdings might be an opportunity hiding in plain sight? Let's dig into what really matters for value-focused investors.
• The stock has been anything but steady lately, with a sharp 21.2% jump in the past week, but flat performance over the past month and a challenging -42.9% return over the last year.
• News cycles have been swirling around Upstart, with coverage often highlighting shifts in the AI lending space and new partnerships that could fuel innovation. Industry watchers are keeping a close eye on evolving regulatory discussions that might redefine the fintech landscape where Upstart operates.
• When it comes to valuation checks, Upstart scores a 1 out of 6, indicating the stock is undervalued on just one metric. Let's break down what goes into that score, from classic valuation methods to an even more revealing way of gauging a company's worth, which is covered at the end of this article.

Upstart Holdings scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Upstart Holdings Excess Returns Analysis

The Excess Returns model estimates intrinsic value by analyzing how much profit a company generates above the cost of its equity capital. This approach highlights the firm's ability to deliver returns on invested capital that outpace what investors could expect elsewhere, making it a useful lens for value-focused investors.

For Upstart Holdings, the model projects a Book Value of $7.65 per share and a Stable EPS of $2.89 per share, based on weighted future Return on Equity estimates from five analysts. The cost of equity stands at $0.98 per share, and the resulting Excess Return comes out to $1.91 per share. Notably, Upstart's average Return on Equity is an impressive 26.20%, and the Stable Book Value is projected to reach $11.05 per share, according to estimates from two analysts.

Based on these inputs, the Excess Returns model estimates Upstart Holdings’ intrinsic value to be just slightly above the current share price, with an implied discount of 0.1%. This suggests the stock is trading almost exactly at its calculated fair value, with no significant undervaluation or overvaluation indicated.

Result: ABOUT RIGHT

Upstart Holdings is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Upstart Holdings.

Approach 2: Upstart Holdings Price vs Earnings

The Price-to-Earnings (PE) ratio is a well-regarded method for valuing profitable companies, as it directly connects a company's earnings power to how much investors are willing to pay for each dollar of profit. It is especially useful for firms that already have established or expected profitability, offering a clear signal about growth and market expectations.

What constitutes a “normal” or “fair” PE ratio can vary widely. Higher growth prospects or exceptional profitability can justify a higher PE, while greater risks or uncertain outlooks usually warrant a lower ratio. Market sentiment, sector trends, and risk profiles all play into how these multiples are interpreted by investors and analysts alike.

At present, Upstart Holdings is trading at a PE ratio of 135.80x. This is dramatically above the Consumer Finance industry average of 9.80x and also well above the average among peer companies at 9.88x. However, context is important. Simply Wall St’s proprietary “Fair Ratio” offers a more tailored benchmark, factoring in company-specific growth potential, risks, profit margin, industry classification, and market cap. For Upstart, the Fair Ratio is 44.24x, based on these deeper, forward-looking criteria.

Unlike typical benchmarks based only on peers or industry averages, the Fair Ratio provides a personalized perspective grounded in what truly drives future value. This makes it a stronger indicator for long-term investors.

Comparing Upstart’s current PE multiple to its Fair Ratio, the stock appears considerably overvalued by this metric, since 135.80x is much higher than 44.24x.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1439 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Upstart Holdings Narrative

Earlier we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is your personal story about what matters for a company, connecting your expectations of Upstart Holdings’ future revenue, earnings, and margins to a fair value, grounded in both data and your perspective. On Simply Wall St’s Community page, Narratives are an intuitive, widely-used tool that lets you easily tie together the company’s story, your assumptions, and what you think the stock is really worth.

Narratives make it simple for investors to track how new information like news events or quarterly results shifts their view and to see if the stock is a buy or sell compared to their fair value. For example, some investors believe Upstart’s strong tech partnerships and model improvements justify a price target as high as $105, while others, cautious about default risks and market volatility, see fair value near $20. Narratives help you visualize and update these scenarios instantly, so you can make decisions confidently, backed by a clear story and up-to-date numbers.

Do you think there's more to the story for Upstart Holdings? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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