ZIP share price in focus
Zip Co is a ‘fintech’ company founded in 2013. It offers a buy-now-pay-later (BNPL) service that is popular among retail consumers.
Zip’s platform allows customers to purchase items immediately and repay them over several interest-free instalments.
Like most BNPL companies, Zip makes money through transaction fees paid by the business, as well as late fees charged to customers who miss payments.
SOL shares
Founded in 1903, Washington H. Soul Pattinson (WHSP) is an investment company with a diversified portfolio spanning various industries and asset classes.
Some of its largest holdings include significant stakes in well-known publicly listed companies such as TPG Telecom (ASX: TPG), New Hope Group (ASX: NHC), and a cross-shareholding in Brickworks (ASX: BKW).
ZIP share price valuation
As a growth company, one way to put a rough guesstimate on the ZIP share price could be to compare its price-to-sales multiple over time. This can tell us how the company has historically been valued relative to its total revenue.
Currently, Zip Co Ltd shares have a price-sales ratio of 4.63x, compared to its 5-year average of 5.81x, meaning its shares are trading lower than their historical average. This could mean that the share price has fallen, or sales have increased, or both. In the case of ZIP, revenue has been growing over the last 3 years. Of course, context is important – and this is just one valuation technique. Investment decisions can’t just be based on one metric, but this can be a rough starting point.
Since it is a more of a ‘blue chip’ company, we could look at the dividend yield of SOL to determine its value. If we compare it to the historical dividend yield, we can get a sense of the stability of the company and its ability to pay out income. SOL is offering a trailing dividend yield of around 2.70%, which compares to its 5-year average of 2.44%. Of course, this is just one of many ways you could put a value on SOL shares. The Rask websites offer free online investing courses, created by analysts explaining valuation methods like Discounted Cash Flow (DCF) and Dividend Discount Models (DDM). They even include free valuation spreadsheets! It’s important to look at multiple methods when you’re trying to value the SOL share price.
