Is SoFi Stock a Buy Now?

Key Points

• SoFi's sales, earnings, and membership are growing rapidly.

• The company's shares have gained more than 200% over the past year.

• Its stock isn't cheap, and investors shouldn't expect the same returns it has recently experienced.

• 10 stocks we like better than SoFi Technologies ›

Financial technology companies benefit from increasing demand among consumers for simple and effective financial products. Not all fintech companies have succeeded as the sector has grown, but one that has is SoFi Technologies (NASDAQ: SOFI).

SoFi is profitable, revenue is on the rise, and its customer base continues to expand. The company has evolved over the years as it has broadened its financial services to include more traditional banking and loan options. Management's constant reinvention and ability to tap into new customers have caused its share price to rise 240% over the past three years.

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Given all this stock price performance in a relatively short time, is SoFi stock a buy right now? Here's why the company continues to attract investors -- and why potential shareholders should consider the stock's valuation before buying.

Image source: Getty Images.

There's no denying SoFi's impressive growth

SoFi got its start in student loan refinancing years ago and has since expanded into personal loans, mortgages, banking accounts, and investing, and it recently got back into cryptocurrency trading.

Building a fintech platform that's essentially a one-stop shop for customers' financial needs has paid off; the company has continued to add new customers rapidly -- increasing the total 34% in the first quarter (which ended March 31) to nearly 11 million.

More members have meant more sales and rising earnings, and the first quarter was no different. Revenue jumped 33% to $770 million, and adjusted earnings skyrocketed 200% to $0.06 per share.

The rest of the year should be just as impressive, and management says sales will be in the range of $3.2 billion to $3.3 billion, which is about a 21% increase from 2024.

And the company hasn't finished expanding, either. It recently announced that it's getting back into the cryptocurrency business, allowing its members to buy and sell it. This could help give revenue an added boost, as cryptocurrency has become more popular among the average investor thanks to the launch of crypto exchange-traded funds.

SoFi has made a lot of right moves over the past few years, making itself a fintech leader by offering great services to its members. The result has been fast-growing sales and earnings -- and a share price that's popped more than 200% over the past 12 months.

Does all of this make SoFi stock a buy?

SoFi's growth and its ability to capitalize on new products and services are compelling reasons to own the stock. But I think there's an asterisk next to its name right now, because its rapid rise over such a short time means that shares now have a price-to-earnings ratio (P/E) of 46.That's pretty expensive, considering the average P/E of the S&P 500 index is about 29.

What's more, if the economy slows down over the next year or so, it's likely that there could be a pullback on some of SoFi's growth. While most economists have recently lowered their estimates for a recession over the next year, JPMorgan Chase still puts the odds at around 40%.If an economic slowdown materializes and causes the fintech's members to borrow less or miss loan payments, some of the current euphoria for its shares could wear off.

Many stocks have soared over the past few years, making them much more expensive compared to historical averages. So it may not be a deal-breaker for some investors to pay a premium for SoFi Technologies' stock right now. Just keep in mind that it's relatively expensive, and it's unlikely that the share price will experience the same phenomenal gains it made over the past year.

Should you invest $1,000 in SoFi Technologies right now?

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JPMorgan Chase is an advertising partner of Motley Fool Money. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.