Mogo Inc. (TSX: MOGO) is a Canadian based financial technology company, which offers finance applications to consumers with solutions that help them to control their financial health. 

Why Should Investors make an exit?

• Restrained financials: Despite posting healthy growth in its total revenue the company failed to carry that momentum at operating level, and it clocked operating loss of CAD 9.9 million compared to an operating profit of CAD 1.9 million in pcp, mainly due to threefold increase in operating expenses.

• Negative cash from operating activities: In the reported period of Q3 2021, the company clocked negative cash from operating activities of CAD 8.9 million against cash from operating activities of CAD 5.2 million in pcp.

• Increasing uncertainties: The reappearance of Delta variant and fresh cases of Omicron variant has prompted many worries, and it may have an impact on the company's operations and cash flows, since the government may tighten some obligatory lockdowns to combat the spread, and consumers may utilize their funds more cautiously to save their distributable income.

• Negative margin profile v/s Industry: In Q3 2021, the company failed on maintaining its pace and witnessed lower performance under operating margin matrix, consisting of EBITDA margin, operating margin and net margin, which exhibits the pressure on company.

Source: REFINITIV, Analysis by Kalkine Group

• Exhausted technical indicators: The stock is continuously making lower highs and lower lows on daily chart, which is considered as a bearish pattern. Furthermore, the stock recently closed below its long-term support and sloping trend line, again a negative sign indicating that it may continue its bearish trend.

Source: REFINITIV, Analysis by Kalkine Group

Valuation Methodology (Illustrative): Price to Book Value

Analysis by Kalkine Group

Stock recommendation

In the recent reported financial numbers, the company posted growth in its revenues but failed to carry that momentum at operating level, where it registered an operating loss of CAD 9.9 million. The company clocked negative margins, which reflects that it is under extreme pressure. Also, it posted negative cash from operating activities, which is not considered as a healthy sign. Furthermore, new Covid variant cases has raised a lot of questions, and it might have an influence on the company's operations and cash flows.  Even the technical indicators implies that the stock is in a bearish trend and the price may correct or consolidate further. Therefore, based on the above rationales, week financials and valuation done we recommend a “Sell” rating on the stock at the closing price of CAD 3.69 on January 7, 2021. 

*The reference data in this report has been partly sourced from REFINITIV.

Disclaimer

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