PGY

Pagaya is a genuine profitability inflection. After four straight years of large losses (-$91M, -$302M, -$128M, -$401M from FY2021–FY2024), FY2025 delivered $81.4M of net income on $1.26B revenue (+25.6%), with operating income nearly quadrupling to $264M (20.9% operating margin) and operating cash flow surging ~400% to $239M. Diluted EPS of $0.93 and 17.0% ROE are real, audited (EY/Kost Forer attested effective internal controls, no going-concern flag). At $16.63 the stock trades at 17.9x earnings, 1.0x sales, and a market cap of $1.30B — undemanding for a company growing the top line 25% and just crossing into self-funding territory. The PEG is well below 1 if even a fraction of this year's earnings momentum persists.

The catch is the engine underneath. Pagaya doesn't simply originate fees — it sponsors ABS securitizations of Partner-originated loans and, per the 10-K, retains at least 5% of the credit risk (Risk Retention) plus discretionary Additional Investments, carrying $945.3M of investments in loans and securities at fair value (up from $778.4M). That balance sheet IS the business model, and it is levered to credit performance and capital-markets access: liabilities/equity sit at 2.0x, the cash-flow statement shows $309.7M used in investing funded by $129.6M of financing, and management explicitly warns that 'higher interest rates could effect overall deal economics as well as the returns we would generate on our related risk retention investments.' Net margin is a thin 6.5% versus the 20.9% operating margin — financing and credit costs eat most of operating profit — and the accumulated deficit is still -$863M.