As we inch closer to earnings season, the scrutiny on stocks is heating up.
Fintech upstart Wisr Ltd [ASX:WZR] has learnt that firsthand today, sharing some fantastic figures from their June quarter.
However, despite the good news, the market’s reaction has been mixed.
After opening strongly, The Wisr share price has pulled back slightly over the trading day. In fact, right now they’re trading for the same price that they closed at yesterday…
A surprising development considering the stock’s recent performance.
Breaking records, but not expectations
Wisr’s final quarter for FY20 certainly capped off a great year.
Revenue for the three-month period totalled $2.9 million. A 50% increase over the May quarter, and an 188% increase over the June quarter of 2019.
A large part of this sales growth is thanks to the volume of lending Wisr is facilitating. Delivering $19.1 million worth of loans in June alone. A 38% increase from the $13.8 million they reported during May.
That’s a staggering amount of month-on-month growth. Showcasing just how well this company is tracking.
Keep in mind, they’ve also achieved this under a more rigorous system. Ensuring that their lending isn’t just growing in terms of value, but also quality. An important detail amidst the backdrop of the ongoing pandemic.
As Wisr CEO, Anthony Nantes notes:
‘Despite maintaining significantly tighter credit policy in response to COVID-19, as well as taking a prudent approach to loan origination, Wisr has achieved signifcant loan origination growth and revenue uplift for the quarter.
‘It’s a strong validation of our fintech business model, proprietary technology, and high-performance culture that we can continue to grow and responsibly lend to our customers to help them consolidate, refinance, purchase, and fulfil their needs through the Wisr Ecosystem in these uncertain times.’
Raising expectations
However, as previously mentioned, Wisr’s share price has barely budged at time of writing, suggesting that investors may not be as impressed with the result as management is.
This could be for a number of reasons, but expectations are certainly a part of the mix.
After all, Wisr is a growth stock. A small-cap that is relying upon ever-increasing revenues to grow the business. Growth that will one day (hopefully) yield a profit.
It’s a common strategy, one that is tried and true.
The fintech sector in particular has plenty of examples showcasing just how lucrative this model can be. One need only look at the booming ‘buy now pay later’ stocks to see that.
But growth can also be a double-edged sword.
Because at the end of the day, if a company’s level of growth doesn’t meet investors’ expectations, the share price will suffer. That is the entire point of market forces.
For that reason, Wisr may need to consider what sort of expectations it is setting for itself. Whether by design or not.
After all, while growth is important, it does need to be managed.
We know this all too well, which is why if you’re looking for potential growth plays, we can help.
Our deep dive into the world of ‘high-value small-caps’ will show you where to look, uncovering and dissecting four of the most promising stocks on the ASX right now.
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Because while it is important to manage expectations, sometimes the sky is truly the limit.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
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