Investors often ask me; “how do you compound your portfolio by 50-100% year on year?”
The truth is I have no control over where the stock price would go, however it is possible for such growth if you know how to pick a multi-bagger stock. I focus on hypergrowth returns and I always look for stocks that can potentially double or triple in 2 to 3 years.
An example case study would be Upstart Holdings (UPST), if you prefer to learn through videos, watch this:
It first gained my attention around early June 2021. After studying it, I realised that the stock is undervalued and was offering a good entry point. I shared with my members-only group and even did a mentoring session with them on the valuation of the stock.
Fast forward to today, I am happy to say that members who took action on getting some position in UPST, would have made more than 100% profits within 4 months.
Today, UPST has started gaining popularity among investors as well.
Let’s jump into my updated deep-dive case study on Upstart Holdings and find out if it is still worth investing in today!
What is Upstart (UPST)?
Upstart is an Artificial Intelligence (AI) lending platform that connects consumers to financial institutions.
They partner with banks to help consumers gain access to affordable credit based on “true risk”. With their AI platform, the processing time for loan applications are much quicker and consumers would not have to go through the traditional way of accessing one’s credit using the outdated FICO score.
According to Upstart, they go beyond the FICO score using non-conventional variables to access the consumer’s risk of defaulting on their loan obligations.
Their AI models are built using these consumer data – Employment History, Credit Experience, Education, Cost of Living, Bank Transaction, Application Interaction.
I believe their shared AI model shown to investors are overly simplified and it would consist of a lot more variables. Why would they reveal their secret sauce to competitors?
Using their proprietary AI lending model, Upstart is able to approve 71% of loans instantly and automatically without human intervention. 97% of Upstart’s revenue comes from fees from banks or servicing fees with zero credit exposure.
Potential growth in the market?
In the United States, the total consumer credit of mortgage and credit card originations from Q2 2020 to Q2 2021 is estimated to be $4.2 trillion dollars, total auto loan originations are $635 billion and the total personal loan originations are estimated to be $84 billion.
Upstart Holdings started with personal loans and are now expanding into the auto loan market. The auto loan’s Total Addressable Market (TAM) is 7.5x bigger than the personal loan market.
The management has been executing well and they had expanded their auto refinance service from 33 to 47 states which covers close to 95% of the US population. They have also increased their dealership footprint by 24% quarter on quarter and have sold over $1 billion in vehicles through their own Prodigy platform in Q2 2021.
Is Upstart Holdings profitable?
Based on their Q2 2021 earnings, UPST is already profitable.
They made $194 million and grew their revenues at a fast rate of 1018% year on year from $17 million. Their net income is $37.3 million. They currently hold more cash than their total liabilities which shows a healthy balance sheet.
UPST’s Valuation…should you still buy UPST now?
If we’re looking at their PS Multiple, the total market cap of the company is about 26.6 billion with an estimated 2021 revenue guidance of $750 million from management, the price to sale ratio (PS) is about 35.4x.
However, based on my estimation of next year’s 2022 revenue, the company might reach $1 billion or $1.5 billion in revenue. Hence, their forward PS range is about 26.6x to 17.7x.
I would consider a PS below 20x to be a fair value for UPST. Do keep in mind that we cannot compare UPST directly with other hypergrowth companies trading at PS above 30x because they do not have a subscription model and their revenues are not recurring.
I continue to hold $UPST even with its latest earnings results, here’s why:
If you like the idea of compounding and growing your portfolio at 50-100% year on year, join me as I share how my hypergrowth investor community and I pick stocks with multi-bagger potentials.
Disclaimer: Author is vested.