Key Takeaways:
- The 2-Minute Valuation Model values NerdWallet stock at $14.50 per share in 2 years.
- That’s a potential 70% upside from today’s share price of about $8.50.
- NerdWallet is trading near its lowest P/E multiple in the past year, despite consistent analyst optimism.
- Wall Street analysts maintain predominantly “Buy” ratings with price targets nearly double the current price.
- Get accurate financial data on over 100,000 global stocks for free on TIKR >>>
In a market where fintech valuations have compressed significantly, NerdWallet (NRDS) presents an interesting opportunity for investors seeking exposure to the digital personal finance sector.
NRDS stock has experienced a substantial pullback, trading at multi-year lows despite the company’s growing influence in consumer financial decisions.
NerdWallet operates a trusted digital platform that provides personalized financial guidance to consumers and small businesses. It helps them make smarter decisions about various financial products, including credit cards, loans, insurance, and investments.
With strong brand recognition and diversified revenue streams, NerdWallet may be positioned for a recovery as market sentiment stabilizes.
With a projected annualized return of 31% over the next two years, this beaten-down fintech stock deserves a closer look. Here’s our detailed valuation analysis.
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What is the 2-Minute Valuation Model?
Three core factors drive a stock’s long-term value:
- Revenue Growth: How big the business becomes.
- Margins: How much the business earns in profit.
- Multiple: How much investors are willing to pay for a business’s earnings.
Our 2-Minute Valuation Model uses a simple formula to value stocks:
Expected Normalized EPS * Forward P/E ratio = Expected Share Price
Revenue growth and margins drive a company’s long-term normalized earnings per share (EPS), and investors can use a stock’s long-term average P/E multiple to get an idea of how the market values a company.
Why NerdWallet Looks Undervalued
Forecast
Based on the company’s recent trends and analyst projections, NerdWallet is expected to reach $1.20 in normalized EPS in 2025.
If we assume that EPS grows at about 10% annually in 2026 and 2027, fueled by revenue growth and margin expansion, then we could assume normalized EPS would reach $1.45 in 2027.
This earnings growth is likely to be driven by:
- Diversified Revenue Model: The company generates revenue from multiple financial verticals, reducing dependence on any single product category.
- Digital Transformation in Finance: As consumers increasingly seek online resources for financial decisions, NerdWallet stands to benefit from this secular trend.
- Market Position: NerdWallet has established itself as a trusted resource for financial guidance, with strong brand recognition and consumer trust.
- Margin Improvement Potential: The company has opportunities to improve profitability through operational efficiencies and increasing scale.
The company’s focus on expanding its user base and monetization strategies suggest that the business has meaningful earnings growth ahead.
View NerdWallet’s full analyst estimates >>>
Valuation Multiple
In the past year, NerdWallet has traded at an average forward P/E multiple of 13.2x, as shown in the historical P/E chart. The stock has traded as high as 18.5x and is currently near its lowest level at 8x.
This dramatic compression in the stock’s multiple presents a potential opportunity for investors.
The current P/E ratio is approximately 40% below its 1-year average, suggesting the stock may be undervalued relative to its trading history.
For our valuation, we’ll use a forward P/E multiple of 10x, which would be a moderate expansion from current levels as market sentiment is likely to normalize.
Fair Value
Using our 2-Minute Valuation Model and applying a conservative approach:
- Conservative 2027 EPS estimate: $1.45
- Conservative forward P/E multiple: 10x
Expected Normalized EPS ($1.45) * Forward P/E ratio (10x) = Expected Share Price ($14.50)
The 2-year expected share price we would get from this valuation is $14.50/share.
This presents a pretty nice potential upside since the stock today trades at around $8.50/share.
The stock could have a 71% potential upside over the next 2 years, which would be about 31% annualized returns:
Keep in mind, this is just a valuation exercise, and we don’t know for sure what the stock’s price will be in the future.
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Analysts’ Price Target
Today, analysts have an average price target of about $16.50/share for NRDS stock, which means they see nearly 100% upside for the stock from current levels.
Analysts clearly think the stock is undervalued today:
Risks to Consider
While our valuation suggests meaningful upside, investors should be aware of several risks:
- Intensifying competition in the financial guidance space
- Potential regulatory changes affecting affiliate marketing and financial advice
- Reduced consumer financial activity in a challenging economic environment
- Digital advertising market fluctuations impacting marketing costs
TIKR Takeaway
NerdWallet presents an intriguing opportunity for investors willing to look past current market volatility.
With the stock trading at its lowest valuation multiple in years, analyst price targets suggesting significant upside, and an established position in the digital finance ecosystem, NerdWallet could deliver returns of over 70% in the next two years for patient investors.
Is NerdWallet a buy over the next 24 months? Use TIKR to check the stock’s analyst price targets and growth forecasts to see if the stock is undervalued today.
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any stocks mentioned. Thank you for reading, and happy investing!
