NERDWALLET, INC. 
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The NerdWallet platform aims to empower users to make informed decisions about their finances by providing editorial content, reviews of financial products, and personalized recommendations. The company covers a wide range of financial topics across eight verticals, including credit cards, mortgages, insurance, banking, investing, and student loans. It is designed to appeal to a broad range of users, from the casual reader to those seeking more complex financial information, and aims to make financial decisions more accessible and frictionless for all users.
Multiple sources of revenue:
NerdWallet's sales are divided into three activities: Credit Cards, Other Verticals, and Loans. Sales between 2021 and 2022 increased by 69.87% and 69.63% for Credit Cards and Other Verticals while they decreased by 13.69% for Loans over the same period. There has been a significant decrease in cash transactions, attributed to pandemic restrictions and the growth of online retailers. Notably, there appears to be a direct correlation between income levels and cash transactions, with cashless purchases rising across all income brackets. Credit cards, which can be integrated with smartphone wallets, have emerged as the second-most popular form of payment and remain a key engine for revenue growth and profit expansion for the group. With $930.6 billion in credit card balances from the fourth quarter, a growth rate of 19%, and $3.089 trillion worth of credit card transactions overall, more individuals may be drawn in by the apex of the digital transition, generating more money.
It has established a solid market position, demonstrating its commitment to building a reliable financial ecosystem through ongoing development. By collaborating with financial institutions and receiving compensation for registrations, NerdWallet has maintained a successful and profitable business model. As credit cards and mobile wallets continue to dominate the payment landscape, the company's expertise in this area positions it well for continued growth and success.
A booming growth?
The personal finance industry is highly competitive, with many players vying for a slice of the market. NerdWallet faces stiff competition from other personal finance websites such as Credit Karma, WalletHub, and Bankrate. These competitors offer similar services, such as credit score monitoring, loan comparison, and financial advice. To stay ahead of the competition, the group, ranked second in terms of website traffic and ranked 4th in customer satisfaction, must continue to innovate and provide unique value to its users. Its strategic expansion into specialized markets and focus on digitization and affiliate-based revenue have helped it establish a strong market position, but it must remain vigilant and adaptable to maintain its success.
The acquisition of On The Barrelhead (OTB) in July 2022 has contributed to NerdWallet's increased user base, which has grown by 9% year-on-year to 20 million unique users (MUUs). While this expansion requires more people and service improvements, it is now operating at a higher capacity and is well-positioned for continued success. However, the company's stock saw a low of nearly 40% in reflection of a complicated 2022 for tech stocks and IPOs in general. Despite this, the platform has seen its share price rise by more than 55% since January 1, showing renewed risk appetite among investors and potential for strong growth for the company.
Financial analysis
The valuation of the group at this stage is a complex task, given the volatility of the market and the uncertainties surrounding the tech industry. It is difficult to determine the "right price" for NerdWallet, as it is trading at 235 times earnings in 2023- and 40-times earnings in 2024. This makes it challenging to assess whether the company is "expensive" or "affordable."
Nonetheless, the company's stock is attractive, with steadily increasing revenues that have risen by 41.97% in the previous year. Analysts are optimistic about the coming years, with sales expected to reach $938 million in 2025 (CAGR of 14.86%) from the $539 million recorded in 2022. Moreover, itWallet's EBITDA has increased by 147% between 2021 and 2022, reaching $67.1 million, and is expected to reach $135 million by 2025.
NerdWallet's financial balances are stable, with $138.4 million accounting for 56% of the company's total funds, making it a highly liquid business. Even better, the currency has a premium of 70% over borrowings, which is essential in light of interest rate increases. Some 14% of the revenue is allocated to operating cash flow, demonstrating the growing activities that generate more income. Consequently, it can pay for CapEx, resulting in an 8% FCF/sales percentage.
The net margin has improved significantly, increasing from -11.2% in 2021 to -1.89% in 2022 and is expected to reach 4.08% in 2024. This positive trend reflects the group's excellent management in increasing sales while boosting margins. Additionally, the group's EPS is projected to increase from 0.06 in 2023 to 0.86 in 2025.
NerdWallet is a promising company in the constantly evolving personal finance industry. Despite its impressive growth and solid market position, there are still risks and uncertainties in its future, such as the lack of visibility and high P/E ratio. The business has developed a strong market position as a result of its strategic expansion into niche markets, but it must continue to be vigilant and adaptable in the face of rising competition and shifting customer demands. Overall, it is worth keeping a close eye on in the coming months, as potential opportunities for investment may emerge.
