Dave Inc. DAVE stock has shown remarkable growth over the past year. The stock has skyrocketed 147.3%, outperforming the industry's 12.9% rally and the Zacks S&P 500 composite's 9.6% growth.

DAVE’s performance is significantly higher than that of its industry peers, Byrna Technologies Inc. BYRN and UiPath PATH. BYRN has gained 58.7%, while PATH has declined 44.7% over the past year.

One-Year Price Performance

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Dave has also outperformed its industry, Byrna Technologies and UiPath in the past six months. DAVE shares have gained 95.9% against the industry and UiPath’s 3.7% and 17.1% declines, respectively. Meanwhile,  Byrna Technologies has risen 33.2%.

In the last trading session, the stock closed at $83.84, 49% down from the 52-week high of $125.00.

Investors might be inclined to buy Dave’s shares, given the rise over the past year. Hereunder, we analyze the stock’s performance and recommend whether investors should buy the stock or stay away from it.

AI-Led Enhanced Credit Performance Benefits Dave

In the fourth quarter of 2024, the company witnessed a decline in credit risk and potential losses amid increasing demand. With a 44% year-over-year increase in originations, DAVE clocked a 53-basis-point improvement in the 28-day delinquency rate. The results can be attributed to CashAI, Dave’s proprietary AI underwriting model, which improved the ability to assess credit risks as it has analyzed more than 125 million ExtraCash originations.

The real-time assessment of bank account transaction data facilitated by CashAI outpaces FICO-based credit decisions that rely on bureau data. The combination of AI and real-time information enables DAVE to lead credit assessments efficiently, such that it lowers credit risk and reduces losses.

DAVE’s Optimistic Margin Expansion

In the fourth quarter of 2024, Dave’s top line grew 38% year over year, driven by an increase in the transacting member base, unlocked via enhancements to MTM retention and effective acquisition of new customers. Revenue growth can also be attributed to higher approval limits of ExtraCash, and growth in Dave Card MTMs and Dave Card spend.

In addition to top-line growth, the variable margin increased 15% year over year in the fourth quarter of 2024. The reasons are a lower proportion of expenses to revenues due to improvements in credit performance led by Cash AI. The percentage of fixed expenses declined 800 basis points (bps) year over year in the fourth quarter of 2024. This can be attributed to prudent headcount management and cost rationalization initiatives.

The combination of these factors led to an operating margin expansion, with the company’s adjusted EBITDA margin increasing 1940 bps year over year in the fourth quarter of 2024. We anticipate the company to experience continued margin expansion on the back of consistent top-line growth and a decline in fixed expenses.

Dave’s Capital Returns Strong

Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. DAVE’s trailing 12-month ROE is 47.7% compared with the industry’s average of 6.4%.

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DAVE’s Liquidity Outpaces Industry

Dave’s current ratio in the fourth quarter of 2024 was 8.05, way higher than the industry’s 1.63. The metric also increased from the preceding quarter’s 6.81 due to a surge in cash reserves. Moreover, a current ratio of more than 1 implies efficient short-term debt coverage capabilities.

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Dave’s Robust Top & Bottom-Line Prospects

The Zacks Consensus Estimate for the company’s 2025 revenues is pegged at $424.5 billion, suggesting a 22.3% increase from the year-ago reported level. For 2026, the top line is anticipated to rise 21.6% year over year.

The consensus estimate for earnings in 2025 is pegged at $6.65 per share, implying 26.9% growth from the year-ago reported level. For 2026, the bottom line is anticipated to rise 22.2% on a year-over-year basis.

Add DAVE to Your Portfolio

Dave has enhanced its credit risk and lowered losses utilizing CashAI, which stands in a better position than the traditional FICO-based credit model. Consistent top-line growth, coupled with variable margin expansion and cost reduction, improved the operating margin.

DAVE’s high capital returns, robust liquidity position, and strong top and bottom-line prospects compel us to recommend that investors acquire the stock right now.

DAVE sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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