SoFi's Tangible Book Value Grew 80% in a Year. Yet the Stock Fell 9% on the News.

Shares of digital banking specialist SoFi Technologies (NASDAQ: SOFI) fell about 9% on Wednesday after the company reported its second-quarter results. The report itself was stacked with records -- record net revenue, a record 1.1 million new members, record loan originations, and a tangible book value that reached $9.5 billion -- 80% higher than a year earlier.

So what exactly did investors sell? A business rarely loses nearly a tenth of its market value on the day it reports numbers like these.

The answer, I think, sits in the one part of the report that didn't move: the profit outlook. But with the stock now priced at just 2 times tangible book value, this could be a buying opportunity.

Image source: SoFi.

A record quarter, top to bottom

SoFi's second-quarter net revenue rose 43% year over year to about $1.2 billion, and net income came in at $156.6 million, up 61%, or $0.12 per diluted share. Non-GAAP (adjusted) EBITDA rose 44% to $357.8 million, a 30% margin. And loan originations reached a record $14.8 billion, up 69% from a year earlier, while fee-based revenue came in at $472 million, about 39% of total revenue.

The member engine kept compounding, too. SoFi added a record 1.1 million members in the quarter, taking its total to 15.8 million, up 35% year over year, and total products climbed 42% to 24.4 million.

Even more, the growth is getting more efficient. Notably, 51% of new products were opened by existing members, up from 43% last quarter and 35% in the year-ago quarter -- an accelerating trend of selling another product to a customer the company already has (a cheaper way to grow than buying new customers with marketing dollars). Products per member reached an all-time high of 1.54.

And then there's the balance sheet, where the headline number lives. Tangible book value (the company's equity after subtracting goodwill and other intangible assets) ended the quarter at $9.5 billion. That works out to $7.34 per share, up from $4.72 a year ago. Total deposits reached $45.5 billion. SoFi's total capital ratio of 18.8% also sits well above the 10.5% regulatory minimum, so the growth isn't running ahead of the capital supporting it.

What the market actually repriced

The sell-off makes more sense once you get to guidance. Management now expects full-year adjusted net revenue of $4.75 billion to $4.85 billion, up from its prior outlook and equal to about 32% to 35% growth. But the profit targets didn't move with it. The company still expects adjusted EBITDA of about $1.6 billion, and it still expects about $0.60 in adjusted earnings per share.

Put another way, SoFi told investors it will generate more revenue this year than it previously planned -- and, for now, turn none of the extra into additional profit. The raised range also implies a slower second half. After adjusted net revenue grew 40% in the second quarter, a full-year pace of 32% to 35% means the growth rate steps down from here.

Neither of those is a crisis. But both are the kind of thing the market prices quickly when a stock has already been weak, and this one had roughly halved from its 52-week high of $32.73 before Wednesday's report.

So, what are shares worth against a book value growing this fast? At $15.25 as of this writing, SoFi costs about 2 times its tangible book value per share, and about 25 times this year's guided adjusted earnings per share. At the stock's high, investors were paying about 4.5 times even today's tangible book value per share -- and tangible book value per share was meaningfully lower then.

For a company growing tangible book value per share 56% year over year while growing revenue faster than 30%, I don't think that's a demanding price anymore. To me, Wednesday's drop looks less like a verdict on the business and more like the market resetting what it will pay for growth that isn't carrying extra profit with it yet.

Sure, the profit guidance could stay flat for another quarter or two while the company keeps investing. But if adjusted EBITDA starts climbing alongside the raised revenue outlook, today's price will likely look conservative. I like the stock at this level. The thing I want to see next is the profit guidance finally moving up with the revenue.

Daniel Sparks and his clients do not have positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.