ZIPCOLTD FPO [ZIP] (ZIP.AX) stock analysis: Buy

Bro's Verdict
Deep Dive

Rating

BUY

Confidence

62%

Target Price

A$3.15

Upside

+38.2%

Horizon

medium

Zip has crossed a genuine profitability inflection with record FY2026 cash EBITDA and statutory profit, driven by a US business compounding at 44% revenue growth with 20% operating margins, and a PEG of ~0.9x on 36.8% EPS growth is not expensive if the trajectory holds. However, the analysis flags a thin EBIT base, widening D&A drag, a 35.7% free cash flow decline, and unresolved source discrepancies, so the consensus $4.22 target is too aggressive. A fair value of $3.00-$3.30 (midpoint $3.15) offers roughly 38% upside, adequate compensation for credit and regulatory risk, warranting a constructive but volatility-sized BUY.

Executive Summary

•Zip has crossed the profitability inflection: FY2026 delivered record cash EBITDA of A$269m (+58% YoY) and statutory net profit of A$116m (+46% YoY), shifting the story from growth at any cost to profitable scaling.

•The US is now the engine, with transaction volume +42.5% to US$8.6b and revenue +44% to US$613m, while operating margin expanded 420bps to a record 20%, tilting the mix toward the higher growth, higher margin geography.

•Valuation is forward loaded: 33.5x NTM P/E and ~31x NTM EV/EBIT look full, but a PEG of ~0.9x on 36.8% EPS growth and trailing EV/EBIT of 84.6x show how much of the earnings base is still ahead, not behind.

•The debate is credit quality versus growth: 409% debt/equity, negative operating cash flow flagged at -49.8x, and BNPL regulatory risk in ANZ are the swing factors against a consensus target of $4.22.

Financial Snapshot

•Revenue (TTM): $1.34b

•Gross margin: 100.0% (fee and net interest revenue model, no cost of goods)

•Operating margin: 42.1%

•Net margin: 8.7%

•ROE: 16.8%

•Debt/equity: 409.2%

•Net debt / EV: 0.31x

•Forward EPS (NTM): $0.07

•Forward P/E (NTM): 33.5x

•Forward EPS growth: +36.8%

•Dividend yield: 0.00%

•FY2026 cash EBITDA: A$269m (+58% YoY)

•FY2026 statutory net profit: A$116m (+46% YoY)

•US transaction volume: US$8.6b (+42.5% YoY)

•US revenue: US$613m (+44% YoY)

•52 week range: $1.38 to $4.93

•Current price: $2.28

Forward Outlook

•Revenue guidance: consensus growth of ~25% YoY (BEST sales growth estimate), implying NTM revenue near $1.68b

•EPS estimates: consensus growth of +36.8% YoY, the fastest line in the model and the core of the re rating case

•Consensus EBIT: $178.1m (ASX Bloomberg) versus $58.2m (Yahoo), a material discrepancy that needs reconciling before sizing the position

•Consensus net income: $117.3m

•Consensus EBITDA: $229.9m, with EBITDA growth of +24.6% YoY

•EBIT growth: +2.1% YoY, notably slower than EBITDA, implying rising depreciation and amortisation drag

•Free cash flow growth: -35.7% YoY, a red flag against the profitability narrative

•Margin trajectory: operating margin already at a record 20% in the US, with further expansion dependent on scale and credit normalisation

•Target price consensus: $4.22, implying ~85% upside from $2.28

Valuation Analysis

Forward Multiples (NTM)

•NTM P/E: 33.5x on forward EPS of $0.07

•NTM P/S: ~3.1x on market cap of $5.14b against NTM revenue near $1.68b

•NTM EV/EBIT: ~31x using EV of $5.54b against consensus EBIT of $178m

•PEG ratio: ~0.9x, the single most supportive metric in the stack

Trailing Multiples (TTM)

•Trailing P/E: 37.5x

•Trailing EV/EBIT: 84.6x, reflecting an EBIT base of only ~$65m

•Trailing EV/EBITDA: 17.8x

•Trailing EV/Revenue: 3.1x

Relative to Own History (EQRV)

•BF P/E 13.8x vs 2 year average 24.2x, -43% below average, implied price at average $4.01

•BF EV/EBITDA 17.8x vs 2 year average 20.8x, -15% below average, implied price at average $2.99

•BF EV/EBIT 21.1x vs 2 year average 62.2x, -66% below average, implied price at average $10.29

•BF EV/Revenue 3.1x vs 2 year average 2.5x, +23% above average, implied price at average $1.51

•LF P/BV 4.2x vs 2 year average 6.0x, -29% below average, implied price at average $3.23

Peer Comparison

•AFRM: ~45x NTM P/E, ~6x NTM P/S, US BNPL leader, premium on scale and funding advantage

•SQ (Block): ~14x NTM P/E, ~2x NTM P/S, Afterpay owner, cheaper on blended fintech mix

•SZL (Sezzle): ~12x NTM P/E, ~2x NTM P/S, closest pure play comparable, trades at a deep discount

•Klarna: ~20x NTM P/E, recently listed, direct US and European competitor

Price Targets

•Consensus target: $4.22

•Bull case (history re rate to average P/E): ~$4.00

•Base case (NTM P/E 30x on $0.07): ~$2.35

•Bear case (EV/Revenue mean reversion): ~$1.51

Key Risks & Catalysts

Risks

•Credit quality deterioration: BNPL loss rates are cyclical, and any consumer slowdown in the US or ANZ hits provisioning directly

•Regulatory overhang: stricter BNPL credit rules in Australia could compress economics and slow merchant onboarding

•Balance sheet leverage: 409% debt/equity and net debt of ~$1.7b leave limited room if funding costs rise

•Free cash flow decline of -35.7% YoY undercuts the profitability narrative

•Data inconsistency between sources (EBIT $58.2m vs $178.1m, market cap $5.14b vs implied $3.2b) raises confidence risk in the numbers

•EBIT growth of only +2.1% versus EBITDA +24.6% signals heavy D&A and possible capitalised cost build

Catalysts

•Continued US operating margin expansion beyond the record 20%

•Further buyback activity, with multiple notifications filed through September and October 2026

•Substantial holder movements, including JPMorgan exiting and new institutional stakes building

•UBS Buy rating maintained, providing sell side support

•New board appointment (Sarah Adam-Gedge) signalling governance build out

•Potential index inclusion and liquidity uplift as market cap scales

Investment Thesis

Zip is a genuine profitable growth inflection story, and the FY2026 result is the proof point the market had been waiting for. Cash EBITDA of A$269m at +58% YoY and statutory profit of A$116m at +46% YoY, driven by a US business compounding at 44% revenue growth with record 20% operating margins, justify a re rating from a loss making BNPL name to a scaled consumer finance platform. On a forward basis, 33.5x NTM P/E against 36.8% EPS growth gives a PEG of roughly 0.9x, which is not expensive if the trajectory holds.

The problem is the quality of that earnings base and the reliability of the data. Trailing EV/EBIT of 84.6x shows how thin current EBIT is, EBIT growth of just +2.1% against EBITDA growth of +24.6% flags a widening D&A gap, and free cash flow is guided down 35.7%. Add 409% debt/equity, negative operating cash flow at -49.8x, and unresolved source discrepancies on EBIT and market cap, and the margin for error is narrow. The stock is down 21% over the past year and trades well below its 200 day average, so sentiment is already cautious.

The stance is constructive but sized for volatility. The consensus target of $4.22 is too aggressive on current data; a fair value nearer $3.00 to $3.30 is more defensible, anchored on the EV/EBITDA history implied price of $2.99 and a modest re rate on 30x to 33x NTM earnings. That is roughly 30% to 45% upside from $2.28, adequate compensation for the credit and regulatory risk. Confirmation on the EBIT discrepancy and a stabilisation in free cash flow are prerequisites before moving to a full weight position.

Written by Buy Side Bro's AI analyst from financials, consensus, filings and recent news. General information only, not financial advice.

ZIPCOLTD FPO [ZIP] ZIP.AX

Bro's Verdict
Deep Dive

Executive Summary

Financial Snapshot

Forward Outlook

Valuation Analysis

Key Risks & Catalysts

Investment Thesis

Run your own analysis free

Bro's VerdictDeep Dive

Executive Summary

Financial Snapshot

Forward Outlook

Valuation Analysis

Key Risks & Catalysts

Investment Thesis

Run your own analysis free

Bro's Verdict
Deep Dive