Pepper Money Ltd (PPM) AI Stock Analysis

• Market Cap: AU$942.37M
• Dividend Yield: 11.71%
• Average Volume (3M): 326.68K
• Price to Earnings (P/E): 9.2
• Beta (1Y): 0.92
• Revenue Growth: -6.49%
• EPS Growth: -5.40%
• Country: AU
• Employees: 863
• Sector: Financial
• Sector Strength: 70
• Industry: Financial - Credit Services
• EPS (TTM): 0.10
• Shares Outstanding: 444,514,920
• 10 Day Avg. Volume: 338,103
• 30 Day Avg. Volume: 326,679
• PEG Ratio: -0.75
• Price to Book (P/B): 0.73
• Price to Sales (P/S): 0.39
• P/FCF Ratio: 0.24
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: AU$2.70
• Price Target Upside: 23.29% Upside
• Rating Consensus: Moderate Buy
• Number of Analyst Covering: 1
• EPS Forecast (FY): N/A
• Revenue Forecast (FY): N/A

• Rating: 56 Neutral
• Price Target: AU$2.50 ▲(14.16% Upside)

The score is held back primarily by financial risk from extremely high leverage and uneven revenue/profit and cash-flow stability, despite a strong cash flow rebound in 2024. Technical signals are also weak in the near term. These risks are partially offset by supportive valuation (low P/E and high dividend yield).

Positive Factors

Market Position

The acquisition of the RAMS home loan portfolio will enhance Pepper Money's market position by expanding its servicing business, potentially leading to more stable annuity-style earnings and increased operational scale.

Cash Flow Improvement

The strong rebound in cash flow in 2024 indicates improved cash generation ability, which can support future growth initiatives and provide a buffer against financial volatility.

Revenue Scale

Significant revenue growth over the years demonstrates Pepper Money's ability to expand its business operations, enhancing its competitive position in the non-bank lending sector.

Negative Factors

High Leverage

Extremely high leverage increases financial risk, making the company more sensitive to changes in funding costs and potential asset-quality pressures, which could impact long-term stability.

Revenue Decline

Recent declines in revenue suggest challenges in maintaining growth momentum, which could affect profitability and market competitiveness if not addressed.

Profitability Volatility

Volatile profitability, with fluctuating net margins, indicates challenges in maintaining consistent earnings, which may affect investor confidence and long-term financial planning.

Pepper Money Ltd Business Overview & Revenue Model

Company Description

Pepper Money Limited operates as a non-bank lender in the mortgage and asset finance markets in Australia and New Zealand. It operates through three segments: Mortgages, Asset Finance, and Loan and Other Servicing. The Mortgages segment engages in the financing of residential home loans and small balance commercial real estate loans. The Asset Finance segment finances a range of asset types for consumer and commercial customers. The Loan and Other Servicing segment provides independent loan servicing for mortgages and personal loans, and broker administration servicing. The company was formerly known as Pepper Group Pty Limited. The company was incorporated in 2000 and is based in North Sydney, Australia.

How the Company Makes Money

Pepper Money generates revenue primarily through interest income from its lending products. Its key revenue streams include mortgage loans, personal loans, and asset finance. By offering these products, the company earns interest over the life of the loan, which forms the core of its income. Pepper Money also benefits from fees associated with the origination and servicing of these loans. Additionally, the company may engage in partnerships with brokers and other financial institutions to expand its reach and enhance its product offerings, which can contribute to its earnings by increasing the volume of loans processed.

Pepper Money Ltd Financial Statement Overview

Summary

Pepper Money Ltd demonstrates a mixed financial performance with strong gross profit margins but declining revenues and operational profitability issues in recent years. The balance sheet reflects high debt levels, posing potential risks, while cash flows show improvement but remain volatile. Continued focus on revenue growth and debt management is essential for enhancing financial stability and long-term profitability.

Income Statement

Pepper Money Ltd's income statement shows declining revenue over recent years, with total revenue dropping from $427.8 million in 2022 to $403.1 million in 2024. The gross profit margin remains high at 100% for 2024 due to the nature of their financial services, but EBIT and EBITDA margins have been zero in 2024, indicating challenges in generating operational profits. The net profit margin for 2024 stands at 24.5%, which is relatively strong. However, the declining revenue trend and absence of EBIT/EBITDA profits pose concerns.

Balance Sheet

The balance sheet reveals high leverage with a debt-to-equity ratio of 19.25 in 2024, indicating significant reliance on debt financing. Stockholders' equity has moderately increased to $855.6 million by 2024. The equity ratio is low at 4.9%, reflecting a highly leveraged position, which may pose financial stability risks in adverse conditions. Return on equity is reasonable at 11.55%, driven by net income performance.

Cash Flow

Cash flow analysis shows variability, with free cash flow improving to $2.59 billion in 2024 from a negative position in earlier years. However, operating cash flow to net income ratio is not calculable for 2024 due to zero operating cash flow, indicating potential challenges in converting income to cash. Historical cash flow trends exhibit volatility, highlighting potential cash management issues.

Breakdown	TTM	Dec 2024	Dec 2023	Dec 2022	Dec 2021	Dec 2020
Income Statement
Total Revenue	964.50M	1.58B	1.52B	1.06B	771.30M	774.10M
Gross Profit	939.10M	1.53B	417.70M	987.60M	699.60M	704.90M
EBITDA	1.21B	1.29B	0.00	801.90M	545.10M	536.40M
Net Income	99.10M	98.80M	110.70M	141.00M	120.80M	-29.60M
Balance Sheet
Total Assets	17.15B	17.47B	20.21B	19.92B	17.27B	14.34B
Cash, Cash Equivalents and Short-Term Investments	999.90M	1.24B	1.53B	1.24B	1.31B	879.80M
Total Debt	16.12B	16.47B	19.26B	18.98B	16.52B	13.66B
Total Liabilities	16.37B	16.62B	19.34B	18.99B	16.63B	13.84B
Stockholders Equity	777.00M	855.60M	825.40M	801.90M	636.40M	498.90M
Cash Flow
Free Cash Flow	1.37B	2.59B	91.20M	-2.31B	-3.00B	-1.36B
Operating Cash Flow	1.37B	2.60B	98.30M	-2.30B	-2.99B	-1.35B
Investing Cash Flow	-4.50M	-49.30M	-7.50M	-87.60M	-266.40M	-48.70M
Financing Cash Flow	-1.47B	-2.85B	194.30M	2.32B	3.68B	1.56B

Pepper Money Ltd Technical Analysis

• Technical Analysis Sentiment: Negative
• Last Price: 2.19
• 50DMA: Negative
• 100DMA: Negative
• 200DMA: Positive
• MACD: Positive
• RSI: Neutral
• STOCH: Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For AU:PPM, the sentiment is Negative. The current price of 2.19 is above the 20-day moving average (MA) of 2.18, below the 50-day MA of 2.29, and above the 200-day MA of 1.88, indicating a neutral trend. The MACD of -0.05 indicates Positive momentum. The RSI at 40.28 is Neutral, neither overbought nor oversold. The STOCH value of 32.93 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for AU:PPM.

Pepper Money Ltd Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
Sector *	68 Neutral	$18.00B	11.42	9.92%	3.81%	9.73%	1.22%
PLT	67 Neutral	AU$204.16M	6.18	95.31%	―	19.38%	―
CCP	57 Neutral	AU$959.74M	10.31	11.07%	4.81%	5.01%	85.56%
PPM	56 Neutral	AU$942.37M	9.18	12.11%	11.71%	-6.49%	-5.40%
LFG	50 Neutral	AU$1.25B	9.34	11.19%	11.83%	2.11%	15.71%
LFS	46 Neutral	AU$1.10B	18.37	5.01%	6.60%	14.81%	―
MME	42 Neutral	AU$93.31M	-1.32	-42.59%	―	-9.56%	-392.31%

Pepper Money Ltd Corporate Events

Pepper Money and KKR Consortium to Acquire RAMS Home Loan Portfolio from Westpac

Pepper Money Limited, in collaboration with a consortium including KKR, has agreed to acquire the RAMS home loan portfolio from Westpac, valued at approximately $21.4 billion. This acquisition aligns with Pepper Money’s strategy to expand its capital-light servicing business, enhancing operational scale and diversification. The transaction, pending regulatory approvals, is expected to complete by the third quarter of 2026, potentially strengthening Pepper Money’s market position and offering annuity-style earnings.

The most recent analyst rating on (AU:PPM) stock is a Buy with a A$2.40 price target. To see the full list of analyst forecasts on Pepper Money Ltd stock, see the AU:PPM Stock Forecast page.