Propel Holdings deserves a higher P/E multiple, Ventum says

Rob Goff of Ventum Capital Markets maintained a “Buy” rating and $45.00 price target on Propel Holdings (Propel Holdings Stock Quote, Chart, News, Analysts, Financials TSXV:PRL) based on what he calls a “strong Q1 beat,” citing robust revenue and EPS outperformance, expanding credit quality, and platform momentum that aligns with his long-term growth thesis.

In his May 6 corporate update, Goff said Propel’s revenue, EPS growth and ROE stand out among its fintech peers.

“The company has a stellar track record leveraging its end-to-end, AI-powered technology platform to effectively serve North American consumers seeking non-prime credit solutions,” he said. “This market segment is largely avoided by traditional banks due to their reliance on conventional credit scores, labour-intensive procedures, and cultures focused on risk-aversion versus return optimization. We believe with consistent outperformance and the formation of new partnerships, PRL is positioning itself to sustain 40%+ EPS growth and ROE.”

Ventum expects Propel to deliver strong returns, driven by continued robust quarterly results, new partnerships in its lending-as-a-service business and its ability to manage finances effectively.

“The company’s available non-equity capital is likely to see significant expansion and rate reduction through the expansion of existing credit lines and where PRL forms partnerships with providers of longer-term debt structures,” Goff said. “We see the additional funding enabling Propel to accelerate its growth while maintaining impressive 40%+ ROE levels. We expect that recent amendments on its credit facility resulting in rate reductions of 150 bps will produce after-tax EPS savings of $0.07-0.08/shr, which we view as meaningfully positive in driving loan book growth upon a lower cost of capital.”

Goff predicts Propel will generate approximately $174-million in adjusted EBITDA on revenue of $620-million in fiscal 2025.

Before the latest earnings, Ventum estimated a 12-month price target of $45.00 (or US$32.62), based on valuing the company at about 10.6 times its expected 2026 earnings and 7.8 times its 2027 earnings.

“We believe the company’s financial performance would support arguments for a higher P/E multiple,” Goff said. “The fuller value that we see with sustained outperformance is better reflected in our DCF analysis. We derive a one-year DCF valuation of C$62.04/shr despite using relatively tough valuation parameters with our exit P/E of 9.75x and a discount rate of 13%. For a company with a 2025 forecast of adjusted pro forma ROE of 33% and average projected adjusted EPS (diluted) growth of 37% across 2024-2027, we argue for a more aggressive P/E multiple.”

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