A comprehensive overview of the financial statements of Robinhood.
By Chris Henry
The UI and ease of use in the platform and app. Their app is by far the best looking, intuitive to easy, almost addicting. I am part of the investment club at my school and many of them personally use Robinhood for trading and investing. If you scroll through reddit or instragram's Threads I see countless portfolio's using Robinhood. This brokerage has a hook in the younger generation.
Revenue Growth:
486 million Q2 2023 vs 682 million Q2 2024 Revenue increased by 40.33%.
Net income Growth:
From 2021 to 2022, net income improved by approximately 72.12%.
From 2022 to 2023, net income improved by approximately 47.37%.
The average net income growth between these years is 60%.
EPS Growth:
From 2021 to 2022: EPS growth of +84.38% (improving from -$7.49 to -$1.17).
From 2022 to 2023: EPS growth of +47.86% (improving from -$1.17 to -$0.61).
The average EPS growth rate over the two years is approximately +66.12%
The latest EPS growth rate Q2 2023 $0.03 vs Q2 2024 $0.21 increased by 600%.
Summary About Income: They are growing net income very quickly while keeping operating expenses stable. From the annual report it looks like transaction based revenue is decreasing while net interest revenue is increasing. After further research into the 10-Q (Q2) from the most recent quarter, transaction revenue is increasing this year and should do near 2021 (covid year) revenues. This is great news. If this was not the case, I would value the company lower since banks generally trade on lower multiples and have less of a moat than a fintech company like HOOD.
Ratios:
Debt to Equity ratio: 72%
Some companies may inflate the price of their brand name to increase the size of assets. It doesn’t look like it is happening in this case because Goodwill and Intangible assets are constant and relatively small in comparison.
Current Ratio: $40,706 million / $34,140 million = 1.19
Slightly smaller but mostly in line with industry average and peers.
Price to Book Ratio: 22 / 8.05 = 2.82
Peer Average: Average Price to Book Ratio in Financial Services: 3.43
Peer Average: Average Price to Book Ratio in Brokerage and Investment Banking: 1.66
Shareholder Equity: 7,122 million
Outstanding Shares: 884,545,769shares
Book Value: 7,122 million / 884,545,769 shares ≈ 8.05USD/share
Return on Equity: 4.05%
Peer Average: 10.5%
It is important to note that the return onequity has increase 125% Year over Year.
Summary Balance Sheet: I did not value this company like a bank, instead I thought of it as a mix of fintech, brokerage and financial service company. Almost all of its liabilities are operational, in contrast to banks with a large degree of both short term and long term debt. It’s really quite remarkable they are accomplishing such a high growth rate with little debt levels. Total debt to equity is in line with industry average, suggesting they are not overextending themselves, even with the addition of a new credit card to their business. Liquidity ratio is fine, in line with industry average. It’s sure hard to go out of business with no debt.
Positive cash flow in 2023. Up 238% from 2022.
Receivable from users, primarily margin receivables are generally decreasing which could indicate efficiency in collections.
Acquired held to maturity and assets and two companies Bitstamp and Pluto Capital which caused investing activities to significantly increase. Considering the Fed recently reduced interest rates, I don’t hate them buying up securities assuming they were at high fixed rates.
Negative cash flow 6 months end: The 1st main point here is negative operating cash flow six months end mainly due to receivables from users and securities borrowed. From the Annual 10-K they seem to be good at recouping receivables from users so I am not worried at these numbers, plus they implemented a credit card during this quarter so this could be another factor.
Summary for Cash Flow Statement: They showed positive operating cash flow in 2023, and invested heavily in held to maturity investments and purchased 608 million in their own stock. Their cash flow is definitely most volatile.
Enterprise Value: App + Property Plant and Equipment + Cash + Debt
Market Cap 20B, Taking out the 4.5 billion in cash
Is the app worth 15.5 Billion, if it nets 800 million this year?
At 22x net this seems like a great price to pay for a company growing at 40%.
Long here, the most intuitive broker by far and continually challenges the status quo.
