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Post by rahafoorum on Dec 27, 2016 10:55:44 GMT
Trying to figure out what specifically would you be looking at to understand how good and stable or on the verge of collapse a platform itself is? Specifically looking at the operational risk in the area of finances from annual statements for example. There are also many different types of business models, which makes it somewhat more difficult I'd assume? Some platforms offer buyback guarantees or funds, others have a higher balance sheet exposure etc.
How would you go about determining whether the risk level of investing with that company is low enough or too high for you? Are there any specific telltale signs you look for or some ratios or trends or...
If you know of any good analyses available publicly, then sharing those would be a welcome sight as well.
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Liz
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Post by Liz on Dec 27, 2016 11:18:13 GMT
Trying to figure out what specifically would you be looking at to understand how good and stable or on the verge of collapse a platform itself is? Specifically looking at the operational risk in the area of finances from annual statements for example. There are also many different types of business models, which makes it somewhat more difficult I'd assume? Some platforms offer buyback guarantees or funds, others have a higher balance sheet exposure etc. How would you go about determining whether the risk level of investing with that company is low enough or too high for you? Are there any specific telltale signs you look for or some ratios or trends or... If you know of any good analyses available publicly, then sharing those would be a welcome sight as well. It's so hard. Financial data is out of date and a lot of these companies are ramping up spending and hiring of staff. It is also hard to tell what the future might hold. A platform could currently be very profitable, but for some reason in the future deals could dry up, starving them of money and causing the platform to fail. I would say larger more established platforms are safer, but we just don't know and don't have historical data. A platform that has cash and makes profit and is growing is a good start. FCA full authoration also adds extra protection.
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Post by rahafoorum on Dec 27, 2016 11:27:24 GMT
It's so hard. Financial data is out of date and a lot of these companies are ramping up spending and hiring of staff. It is also hard to tell what the future might hold. A platform could currently be very profitable, but for some reason in the future deals could dry up, starving them of money and causing the platform to fail. I would say larger more established platforms are safer, but we just don't know and don't have historical data. A platform that has cash and makes profit and is growing is a good start. FCA full authoration also adds extra protection. I agree that looking at financials only is a losing proposition. It is simply one part of the analysis. What you highlighted are definitely important criteria to look at. On the other hand, do you have some specific ratios you look at when considering for example the cash amount? I.e. cash to cover at least XX month's expenses (although that would be very arbitrary figure in the cases where costs and ramped up) or at minimum XX ratio to liabilities/buyback guarantees? What also makes it difficult in the latter case, is that they could have lines of financing open with some bank or another institution, but you wouldn't necessarily see that information in the statements?
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Post by meledor on Dec 27, 2016 16:51:39 GMT
In my opinion not much analysis is required of a P2P company's financials - which is a good thing because often not much information is provided on account of disclosure exemptions.
All I need to know is it making a reasonable profit? If it is still making a loss is the loss less than the previous year? If it is still making sizeable losses who is putting the money in to keep it going (look at the shareholders - a decent financial institution with deep pockets would come in handy)? How likely and for how long is that going to continue?
You have to wonder how any platform, beyond the initial couple of years start up phase, whose business model cannot turn a profit in the good times is going to survive when inevitably things take a turn for the worse. I think we are approaching the stage such platforms will have to shape up or ship out and that as a result a few platforms will disappear.
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Post by rahafoorum on Dec 27, 2016 21:26:08 GMT
In my opinion not much analysis is required of a P2P company's financials - which is a good thing because often not much information is provided on account of disclosure exemptions.
All I need to know is it making a reasonable profit? If it is still making a loss is the loss less than the previous year? If it is still making sizeable losses who is putting the money in to keep it going (look at the shareholders - a decent financial institution with deep pockets would come in handy)? How likely and for how long is that going to continue?
You have to wonder how any platform, beyond the initial couple of years start up phase, whose business model cannot turn a profit in the good times is going to survive when inevitably things take a turn for the worse. I think we are approaching the stage such platforms will have to shape up or ship out and that as a result a few platforms will disappear. Great thoughts. Couldn't agree more with the good times argument. One exception could be just started companies, but if old ones are still struggling to reach profitability, then it can't be a very good sign, can it?
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jonah
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Post by jonah on Dec 28, 2016 8:28:37 GMT
Whilst RS is profitable I understand That zopa isn't... and it has been around for quite a while now!
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Post by meledor on Dec 28, 2016 10:01:53 GMT
Whilst RS is profitable I understand That zopa isn't... and it has been around for quite a while now!
I think Zopa is a case in point. It's apparently been around for over 10 years, so way beyond the start-up phase, but its losses in the last accounts for 2015 are getting worse. An increase in revenue was more than matched by an increase in expenses as staff numbers doubled. It just doesn't look like a business model that is profitably scalable and that in a period of benign credit conditions. To add to the picture there was a new CEO who was paid a fat cat package (considering the small size of the company) of £622k (compared with £179k for highest paid director in the previous year).
Losses are being covered by capital contributions from the Delaware registered parent company. Maybe 2016 has seen a change in its fortunes but the evidence from the the accounts we have suggests it is either trying to buy market share or is unable, because of stronger competition, to profitably price its products/services. Either way not a platform I would have a lot of confidence in.
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registerme
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Post by registerme on Dec 28, 2016 10:04:59 GMT
There's another thread related to this (comment) elsewhere, but I think the list of currently profitable p2p companies is considerably shorter than the list of currently loss making p2p companies.
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Post by rahafoorum on Dec 29, 2016 5:44:40 GMT
Thank you for all the contributions so far. My takeaways from this at the moment: 1. Financials alone don't tell you much today, even if they're bad (I mean, look at Uber..). 2. We should prefer a platform in profit, with plenty of cash and decent pace of growth (too fast is bad as well usually, since affects quality of loans), but we're not very likely to find one  In this case we'd like to see the trend of whether things have been getting better YoY or worse. 3. ... Any other ideas on how you'd go about this business of gauging P2P financials? |
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In this case we'd like to see the trend of whether things have been getting better YoY or worse.