• Sofi Technologies (SOFI) saw strong growth in first-quarter membership and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization.)
• SOFI shares are now trading at just 1.1 times book value and likely trading below book value on a forward-looking basis.
• Value investors may want to take a second look at SOFI stocks, given their current cheapness.

Sofi Technologies (NASDAQ:SOFI) reported strong first quarter results on May 10, including growth in membership and revenue. It also reported a strong increase in Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization.) Additionally, the company reported an increase – not a reduction – in its book value (equity). good business now.

For example, as of May 18, SOFI stock had a market capitalization of $5.78 billion. But its equity (book value) fell from $4.377 billion at the end of 2021 to $5.211 billion as of March 31. This represents a gain of 19% in a single quarter.

This is where the opportunity for evaluation arises. SOFI shares trade for only 1.1 times book value (BV). It’s just too cheap. The reason for this is that its BV is expected to continue to grow over the coming year, which implies that its P/BV multiple will fall below 1x.

Where That Could Leave SOFI Stock

Sofi went to great lengths to show that its actual revenue and adjusted EBITDA in the first quarter were well above its previous guidance. The company also provided guidance for “strong growth” in the second quarter, with revenue up 39% to 43% year-over-year.

With EBITDA forecasts of $5-15 million, one can probably expect him to be down on what he really expects to see in the second quarter. As a result, there is every reason to believe that its book value in the second quarter and at the end of 2022 will increase significantly.

For example, suppose equity increases by 5% over the next three quarters. This is significantly lower than the 19% gain in the first quarter. This also corresponds to a compound growth rate of 15.76% by the end of 2022. This puts its book value at just over $6 billion.

This means that if SOFI stock remains where it is today, its price/book value will fall to 0.959 times. This is unlikely to happen if the company continues to see good growth like it did in the first quarter.

For example, if the market increases its P/BV to 1.25x by the end of 2022, that puts SoFi’s potential market capitalization at $7.54 billion. That’s 30.4% more than its $5.78 billion market cap today.

What to do with SOFI shares

The values ​​calculated above imply that SOFI stock could be worth 30% more, or $9.43 per share (i.e. $7.23 x 1.304). That’s a pretty good return for most investors, assuming the stock trades at 1.25 times book value by the end of the year. It also assumes that the quarterly book value growth is 5% for each of the next three quarters.

With this in mind, value investors should consider buying SOFI shares.

As of the date of publication, Mark Hake did not hold (either directly or indirectly) any position in the securities mentioned in this article. The opinions expressed in this article are those of the author, subject to InvestorPlace.com publishing guidelines.