Key Ratio Comparison P2P Lending Companies

Dear reader,

There are at least three listed p2p lending companies where Trustbuddy is from Sweden and LendingClub together with On Deck Capital Inc. is from the U.S. They are interesting because they are among the first listed p2p lending companies in the world. Let’s take a closer look at them and my analysis of their key ratios which I have calculated based on their 2014 annual report.

Trustbuddy 20150531OnDeckCapital 20150531LendingClub 20150531

 

TBDY Market Cap is 14 MUSD, ONDK is 1,06 BUSD, and LC is 7,15 BUSD.

KEY RATIOS Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
Book Value per Common Share 0,04 4,49 2,62

TBDY is trading around 7 times book value, ONDK around 3 times, and LC around  7 times, not too close liquidation value. This indicates they are not too close to actually close shop.

None of the three are currently paying any dividends so no Dividend Payout Ratio is available.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
Earnings per Share (EPS) -0,09 -0,36 -0,09

All three currently have negative EPS, indicating they are either not succeeding with their business or they are focused on growth. TBDY was founded 2009 and listed 2011, ONDK was founded 2006 and listed in 2014, and LC was founded 2007 and listed 2014. As they are all relatively new I consider them all to be growing companies. This time I haven’t looked into historical figures which could indicate a pattern or direction for the EPS-figures.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
Gross Profit Margin 82% 46% 59%

The Gross Profit Margins show they all seem to have sound businesses. The business is scalable as it is easy to expand the amount of brokered loans once the infrastructure is in place, and thus, we could expect a better margin by the larger companies ONDK and LC compared to TBDY. However, in this case TBDY has the best Margin. They might have different priorities when it comes to growth speed.

The P/E-ratios are negative for all three and that ratio is therefore disregarded here at this time.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
Profit Margin -43% -25% -16%

All three have negative profit margins which is comprehensible as they are all young companies, still fighting to gain market shares in this relatively new market. In this case, it is more interesting to see for how long they can manage to survive with these negative margins before they run out of cash and need more life sustaining injections, which can be determined by the ROE, Debt-ratio, ACID-test ratio, and Interest Coverage Ratio.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
Return on Equity (ROE) -229,0% -6% -3%
Debt Ratio 0,41 0,57 0,75
Debt/Equity-ratio 5,34 1,35 3,00
Acid Test Ratio 1,31 139,9 8,88
Interest Coverage Ratio -872,7 -17,8 0,60

All three companies have Debt-ratios below 1 which is relatively healthy whereas the Debt/Equity-ratios are noticeably higher for TBDY, meaning they use more debt than the others to finance their operations or expansion which widens both the possible upside and downside for TBDY compared to the other two. On the other hand, they all have positive Acid Test-ratios, signaling they can all cover their short-term debt with their current assets, even TBDY.

All Interest Coverage Ratios are below 1, telling us they are still in need of external funds in order to sustain their expansion, which is normal during heavy growth phases.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
PEG-ratio -0,1 -1,77 -8,69

In the PEG-ratio above I have used an arbitrary growth number of 25% on all three companies. All three firms’ P/E-ratios are negative which leaves the PEG-ratios unusable at this time due to the fact that it is not possible to factor in growth on negative earnings.

Trustbuddy (TBDY.ST) SEK On Deck Capital, Inc. (ONDK) USD LendingClub Corporation (LC) USD
P/S-ratio 1,32 6,64 33,84

Now, here we are starting to see some real differences between the companies. The market is valuing each $1 in revenue by LC to $34, meaning 34 times the dollar. For ONDK the same ratio is over 6 times, whereas for TBDY the market values it slightly over 1. In case these companies are ”equally good” on all other levels, this means TBDY is way undervalued compared to the other two. On the other hand, LC could be way overvalued by the market compared to the other two, or else, the market believes LC will succeed much better than the other two.

Conclusion

All three companies are young and growing, still fighting for market shares. LendingClub has the highest market valuation among the three, although the reason why cannot be derived from this key ratio analysis. Trustbuddy has the lowest valuation amongst them, it’s not clear why, but having the highest Debt/Equity-ratio could be part of the reason. Depending on your own view of the p2p lending market, Trustbuddy is the up and coming player who is currently undervalued and will catch up with the other two, and thus a BUY recommendation. If you have negative outlook for the p2p lending market in general, you might wanna consider shorting/selling your LendingClub shares.