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Open Lending: Recently Oversold On Big Earnings Miss, Now Priced As An Asymmetric Bet
Summary
- Open Lending Corporation, an asset-light software company, trades at an EV of $50mn, despite historically averaging $42mn in EBIT and returning 86% as dividends and buybacks.
- The company has no loan liability, a net cash position of ~$100mn, and a market cap of ~$150mn, with no current default risk.
- Recent $96mn revenue write-down due to higher default rates in 2021-2024 vintages - GAAP rules concentrate this write-down and make it appear worse than it fundamentally is.
- New CEO Jessica Buss is focusing on cost reduction and operational efficiency, potentially adding $144mn in value from OpEx reduction.
I am a value investor and resident of Graham-Doddsville. I believe in buying businesses for less than they are intrinsically worth, with a decent margin of safety. I am often contrarian. I find that the best deals are often found for unpopular companies or industries. I write up every equity I am interested in to center my thoughts. I publish write ups on seeking alpha that I feel don't have adequate coverage. I am attending the University of Minnesota - MBA program.
Analyst’s Disclosure: I/we have a beneficial long position in the shares of LPRO either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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