- If you are wondering whether Enova International's current share price fairly reflects its underlying worth, you are not alone. That is exactly what this valuation focused review is set up to unpack for you.
- The stock last closed at US$144.43, with returns of 41.0% over 1 year, 190.1% over 3 years and 351.3% over 5 years, even as the share price has seen a 3.1% decline over 7 days, an 8.9% decline over 30 days and a 10.8% decline year to date.
- Recent attention on Enova International has been less about fresh headlines and more about how traders are reacting to the existing story. This can cause short term swings as expectations shift, so it can be a useful time to separate sentiment from fundamentals and look closely at what you are actually paying for the business.
- On our valuation checklist, Enova International scores 3 out of 6 for being undervalued. Next we will walk through the different valuation approaches behind that score and later on look at an even richer way to think about what the stock might be worth.
Approach 1: Enova International Excess Returns Analysis
The Excess Returns model asks a simple question: is Enova International earning more on its equity than investors require, and if so, how much is that worth per share today? Instead of focusing on cash flows, it looks at the profit generated on shareholders' equity after charging a cost of equity.
For Enova International, the model uses a Book Value of $54.08 per share and a Stable Book Value of $43.31 per share, based on the median book value from the past 5 years. Using an Average Return on Equity of 16.87%, this translates into a Stable EPS of $7.30 per share, sourced from that same 5 year median return on equity.
The Cost of Equity is set at $4.55 per share, so the Excess Return is $2.76 per share, which represents earnings above what equity investors are assumed to require. These excess returns are then projected and capitalised to arrive at an estimated intrinsic value of US$82.21 per share.
Against the recent share price of US$144.43, this Excess Returns estimate implies the stock is about 75.7% overvalued on this model.
Result: OVERVALUED
Our Excess Returns analysis suggests Enova International may be overvalued by 75.7%. Discover 53 high quality undervalued stocks or create your own screener to find better value opportunities.
Approach 2: Enova International Price vs Earnings
For a profitable company like Enova International, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. It links directly to how quickly those earnings might change over time and how confident investors feel about the stability of those earnings.
In general, higher growth expectations and lower perceived risk can justify a higher P/E, while slower growth or higher risk usually align with a lower, more cautious multiple. Enova International currently trades on a P/E of 11.71x. That compares with a Consumer Finance industry average P/E of 8.43x and a peer group average of 18.61x, so the stock sits between the broader industry and closer peers.
Simply Wall St's Fair Ratio for Enova International is 16.94x. This is a proprietary estimate of what a "normal" P/E could look like after accounting for factors such as earnings growth, profit margins, industry, market cap and company specific risks. Because it ties the multiple to these fundamentals, the Fair Ratio can be more informative than a simple comparison with peers or the industry. With the current P/E of 11.71x sitting below the 16.94x Fair Ratio, the shares appear undervalued on this metric.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Enova International Narrative
Earlier we mentioned that there is an even better way to understand valuation. On Simply Wall St's Community page you can build or follow a Narrative for Enova International. This is simply your story about the business linked to a clear forecast for revenue, earnings and margins, and then to a fair value. For example, one investor might lean toward the higher Enova fair value of about US$193.71 if they agree with assumptions such as revenue growth of about 58.76%, a profit margin near 8.56% and a future P/E of around 11.22x. A more cautious investor might anchor closer to the lowest analyst target of US$111 if they focus on regulatory or credit risks. Both can then compare their fair value to the current price and see their Narrative automatically refresh as new news, earnings or analyst updates come in.
Do you think there's more to the story for Enova International? 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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