Sofi Technologies (NASDAQ:SOFI) reported good Q2 results on Aug. 12, including record quarterly growth of 101% year-over-year (YoY) and adj. revenue up 74%. The problem is, as I wrote last month, SOFI stock looks to be fairly valued now. That seems to imply that the stock might not rise. Or could it? This article will look at that possibility.

Sofi stock went public in early January via a special purpose acquisition company (SPAC) that ended up at $22.65 on its first day of trading on Jan. 6. The problem is that as of Sept. 28, the stock closed at $17.04. In other words, since going public, no one who has held on has made any money.

Moreover, the stock has had a highly volatile road. For example, the stock had peaked early on Feb. 1 at $25.78 and then later had a second peak on June 8 at $23.89.  So, you can see SOFI stock has been on a big merry-go-round for the past nine months.

Where Things Stand at Sofi Technologies

Sofi makes most of its money from personal loans and, to a lesser degree, home and student loans. But the main issue for the stock is its huge net income loss. Sofi lost $165.3 million in Q2, compared to a net income of $7.8 million in last year’s second quarter.

On the other hand, its adj. EBITDA (earnings before interest, taxes, depreciation, and amortization), a form of cash flow, was positive at $11.24 million. This was much better than last year when it lost $23.75 million in EBITDA. These figures can be seen on page 20 of the company’s earnings release.

So things might be turning around for Sofi from last year when Covid caused much lower financial activity. However, the cash flow statement on page 22 of the earnings release shows a much lower cash flow.

For example, its operating cash flow for the six months ending June 30 was $82.6 million. After subtracting $26.8 million, the free cash flow (FCF) for that period was $55.8 million. The prior year the company’s FCF was much higher at $386.1 million.

In other words, the six months period shows a much lower cash flow than last year. You can’t fool the market. This could very well be the reason why SOFI stock has not done well this year.

Where This Leaves SOFI

Analysts surveyed by Seeking Alpha don’t expect Sofi to produce positive earnings per share until at least 2033. By 2024 they foresee EPS of 35 cents per share. This puts SOFI stock on a forward price-to-earnings (P/E) multiple of 49.25 times. This is pretty expensive, especially considering this is more than 3 years in the future.

However, in my previous article on SOFI, I showed that the stock, despite its high P/E ratio, has a fairly moderate price-to-book-value metric. The stock trades for a little over 3.2 times its stated shareholders’ equity. This is two times higher than its peers, with a sector median of about 1.23 times book value.

However, Sofi also trades for 9.29 times the forward estimate of its sales next year. At below 10 times sales, this seems about right for a company that is still in a rebound situation, especially in terms of its sales and FCF growth prospects.

What To Do With SOFI Stock

Wall Street analysts are still very exuberant on SOFI stock. For example, TipRanks.com reports that 5 analysts have an average price target of $24.50, or 43.8% higher than Sept. 28’s closing price of $17.04. This is the exact same at Yahoo! Finance, which uses Refinitiv analyst survey data.

However, Seeking Alpha indicates there are 7 analysts covering the stock and their average price target is $23.83. This is slightly lower, but still represents an upside of 39.8% over the next 12 months.

I am still ambivalent about this. I think the stock could easily rise, but its valuation is pretty high and it looks to be at fair value. The company might have to grow into this value for a while.

Nevertheless, it is very possible for a fairly valued stock to rise and become overvalued. Investors in SOFI stock could easily see a 30% to 40% move up over the next year, even though that might make it very expensive.

On the date of publication, Mark R. Hake did not hold a position in any security mentioned in the article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Mark Hake writes about personal finance on mrhake.medium.com and runs the Total Yield Value Guide which you can review here.