AXOS FINANCIAL, INC. (AX): what the price assumes

In the published model solve dated 2026-Q2, anchored at $97.95, AXOS FINANCIAL, INC. (AX) is priced for 18.1% return on equity. boothcheck publishes no house fair value, target price, or buy/sell rating; individual model outputs and user-controlled scenarios are analytical inputs, not Boothcheck targets. Narrative composed 2026-07-25.

Generated: 2026-09-07 · Exported: 2026-09-09 · Source: https://boothcheck.com/report/AX

Headline

What The Price Assumes (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

Solve inputs: computed at a 12% cost of equity; ROE searched up to the 16% ROE ceiling.

How unusual the bet is: elevated

Valuation X-Ray

The price is supported by asset-based and earnings-power value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

Families that justify the price: Asset, Earnings

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 8.9%); the inversion above states its own rate.

Per-Model Detail (n=4)

Economic-Unit Decomposition (Sum Of The Parts)

The issuer is a funded financial business. Debt, interest, and cash flows are operating inputs, so industrial EV, net-debt, WACC, and free-cash-flow lenses do not apply; value the common-equity claim with book, earnings, capital, and payout economics.

No unit-level total common-equity value is stated. Each financial unit requires supported standalone common equity, normalized earnings, capital adequacy, and payout capacity. Consolidated debt, interest, and cash are operating balances, not an enterprise-to-equity bridge; company-level book, earnings, capital, and payout lenses remain the coherent cross-checks.

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

• Axos runs a bank without a branch network, describing its own model as "lending through online, low-cost distribution channels to serve the needs of consumers and small businesses nationally" while gathering deposits nationwide through industry verticals, and that structure is why a lender of this size earns a 16.1% return on equity.
• Concentration is the exposure that matters: the 10-K puts the commercial and industrial book at "approximately $6.8 billion at June 30, 2025, or 31.6% of our total loan portfolio", and roughly 35.8% of the real-estate lending sits behind California collateral.
• Fiscal fourth-quarter results arrive July 30, 2026, the first look at whether the March quarter's loan expansion carried through the June quarter.

Bull Case

Shareholders of Axos receive nothing in cash. There is no dividend. Every dollar of the 476.1 million dollars earned over the trailing year stayed inside the company, and the 10-K is explicit that repurchases compete for that money, made "subject to its assessment of alternative uses of capital, stock trading price, general market conditions and regulatory factors". The share count tells you which way the decision has gone: down about 1.2% a year since 2022. That is a modest retirement rate, and deliberately so. Most of the retained earnings went somewhere else.

They went into loans. Net loan balances reached $25.0 billion at March 31, 2026, an increase of $685.0 million in that quarter alone. For a bank, retaining earnings is not idle hoarding; regulatory capital is the binding input on how much a lender can hold, so retained profit is the raw material of loan growth. A bank that pays out half its earnings grows its book half as fast, all else equal. Axos has chosen the other end of that trade.

What makes the choice work is where the spread comes from. The company describes the banking side as "lending through online, low-cost distribution channels to serve the needs of consumers and small businesses nationally" and says "the Banking Business Segment focuses on providing deposit products nationwide to industry verticals". Deposits arrive through channels a branch bank does not use: the filing lists "We generate deposits through a variety of channels, including advertisements, sales teams, software company affiliates, financial advisory firms, affinity partnerships and our lending businesses." The result is that the gap between what Axos earns on its assets and pays on its funding ran 4.76% in the March 2026 quarter. That gap is the whole business. A bank earning it on a growing book compounds without needing anything clever to happen.

The cohort makes the point by contrast. EWBC grew revenue 13.4% over its most recent trailing year and WAL 11.6%, both on balance sheets several times larger; BOKF managed 9.7% and CBSH 7.8%. Those are respectable numbers for institutions with branch footprints and legacy cost structures. Axos is doing its growing without either, which is why the return on equity sits at 16.1% rather than in the low teens where most of this cohort lives. The securities and clearing arm has been the softer half lately, and it is roughly 11% of revenue, so the case rests on the bank. That is the honest shape of it: one very good engine and a small second one that has not been pulling.

Bear Case

Look at what secures the loans and the picture narrows quickly. The 10-K states that "Our commercial and industrial loan portfolio was approximately $6.8 billion at June 30, 2025, or 31.6% of our total loan portfolio." It also discloses that "approximately 35.8% of our real estate loan portfolio was secured by real estate located in California at June 30, 2025". On the office side the company names the mechanism itself, warning that "tenants may reduce the office space they lease as some portion of the workforce continues to work remotely on a hybrid or full-time basis". A national online lender turns out to have a distinctly regional collateral base, and commercial credit is the part of a loan book that fails in clusters rather than one borrower at a time.

The funding side has its own shape. Axos did not win most of its deposits through a branch relationship; it won them by paying for them and by plugging into verticals. The filing describes the asymmetry plainly: "A portion of the Bank's deposits are based on administrative rates controlled by management and the remaining portion are directly tied to Fed Funds." Money gathered on price is money that can be re-priced away, and a lender in that position defends its funding with rate rather than with inertia. That is not fragility today. It is the reason the spread has to be watched rather than assumed.

Which brings the argument to what the price requires. At roughly 1.8 times book, the market is assuming Axos holds a return on equity of about 16% for something like 17 years before it settles toward ordinary, which is the same as assuming about 18.6% held indefinitely. It earns 16.1% today. The assumption therefore runs ahead of its own record rather than merely matching it, and the multiple of book it trades on is the richest in its cohort. Of the firms that have reached this level of return, only about 53% were still earning it a decade later. If the return drifts back toward the cost of the equity funding it, the multiple that return supports compresses, and a bank paying no dividend offers the holder nothing to collect while waiting.

The second segment is not currently helping. The 10-K reports that "our Securities Business Segment had income before taxes of $32.9 million compared to income before taxes of $40.1 million" in the prior fiscal year. Clearing and securities financing are cyclical, capital-consuming, and competitive against firms with far more scale: SCHW carries revenue of $24.8 billion and IBKR $6.4 billion, against a segment that is about 11% of the Axos revenue line. The diversification argument for owning both is real, but on the current numbers the smaller business is a drag on the return the price is underwriting, not a support for it.

Valuation

A bank is not valued the way an operating company is. What matters is not the multiple of profit you pay but the return the equity produces and how long it lasts, because the two together determine what a dollar of book is worth. On that reading, today's price near $95.83 is paying roughly 1.8 times book, which embeds an assumption that Axos holds a return on equity of about 16% for something on the order of 17 years before it normalizes. Held forever instead of fading, that is equivalent to about 18.6%. The company earns 16.1% now.

The distance between those two figures is the entire question. The assumed return runs above what Axos has actually delivered across its own record, and its price-to-book sits at the very top of the peer set, above EWBC, WAL and CBSH. History is not encouraging on persistence either: only about 53% of firms that reached this level of return were still earning it ten years on. Elite bank returns are not a stable state; they are a position that competition, credit cycles and deposit pricing steadily erode.

Then the methods disagree with that read, and the disagreement is informative rather than embarrassing. Value the equity on its book plus the excess return it generates, or on the earnings stream against a static sector reference multiple, or on the conservative earnings-and-book floor, and all of those land at or above today's price. Only the forward approach, the one that projects the revenue line and applies a terminal sales multiple to it, sits under the price, and by a wide gap. Read against the trailing evidence, in other words, Axos does not look expensive. Read against the durability the price needs, it looks demanding. Both statements are true, because they are answering different questions: what the current earnings power is worth, versus how long that earnings power stays this good.

Solvency here is not a leverage question. Deposits are the raw material of a bank, not borrowings, so the frame is regulatory capital and what the company can return from it. Axos pays out nothing, retains everything, and has shrunk its share count about 1.2% a year since 2022 while growing loans at a double-digit pace. The filing is candid that this is the real constraint, noting that "From time to time, we may need to raise additional capital to support the Company's and Bank's further growth". Growth of the kind Axos is doing eats the capital that a slower bank would hand back, and a share issued to fund it is a share that dilutes the return the price is counting on. That, rather than credit or liquidity, is where the assumption gets tested first.

Catalysts

The March 2026 quarter set the bar. Axos reported net income of $124.7 million and diluted EPS of $2.15 for the quarter ended March 31, 2026, with diluted EPS up 19% from the year-earlier quarter and net loan balances of $25.0 billion, a net increase of $685.0 million over the three months. The spread between asset yields and funding costs came in at 4.76% for that quarter, and management attributed the result to loan expansion paired with expense discipline. For a lender whose whole case rests on originating at wide spreads without a branch cost structure, those are the two lines that carry the story.

The next print lands soon. The company will report fourth-quarter and full fiscal-year 2026 results on July 30, 2026, covering the year ended June 30, 2026, with a call the same afternoon. Three things in that release do more work than the headline: whether the loan book kept expanding at the March quarter's pace, whether the funding spread held as deposit competition and rate policy moved, and what the securities and clearing segment contributed after a fiscal 2025 in which its pre-tax income fell.

Because Axos closes its fiscal year in June, the July report is also the annual one, which means the 10-K and its updated credit disclosures follow within weeks. Loan-loss provisioning, the commercial and industrial concentration, and the California real-estate exposure all get restated there on fresh numbers. Those pages, more than the quarterly earnings line, are where the durability of the return actually gets evidenced.

Peer Cohorts (Per Segment, With Filing Citations)

Banking Business Segment (reported)

• BOKF (BOK FINANCIAL CORP)
• FY2025 10-K: …$46.3 million, including a $33.3 million increase in personnel expense and a $13.0 million increase in non-personnel expense. The increase in net income before taxes attributed to Funds Management and Other reflects the ongoing application of the Company's transfer pricing methodology. Table 14 - Net Income Before…
• FY2025 10-K: Personnel expense increased $12.8 million, or 7%, largely driven by increased incentive compensation costs, annual merit increases, and salary adjustments. Non-personnel expense increased $3.3 million, or 3%, as the prior year included a recovery of operational losses. The average outstanding balance of loans…
• CASH (PATHWARD FINANCIAL, INC.)
• FY2025 10-K: …The Company monitors relevant tax authorities and changes its estimate of accrued income tax due to changes in income or franchise tax laws and their interpretation by the courts and regulatory authorities. Competition The Company operates in competitive markets for each of the different financial sectors in which it…
• FY2025 10-K: …the Company operates; adverse developments in the financial services industry generally such as bank failures, responsive measures to mitigate and manage such developments, related supervisory and regulatory actions and costs, and related impacts on customer behavior; inflation, market, and monetary fluctuations; our…
• EWBC (EAST WEST BANCORP INC)
• FY2025 10-K: …various Asian languages and dialects. In addition to offering traditional deposit products that include personal and business checking and savings accounts, money market, and time deposits, the Bank also offers foreign exchange, treasury management and wealth management services. The Bank's lending activities include…
• FY2025 10-K: …and (3) Treasury and Other, are based on the Bank's core strategy. The Consumer and Business Banking segment primarily provides financial products and services to consumer and commercial customers through the Company's domestic branch network and digital banking platforms. The Commercial Banking segment primarily…
• WAL (WESTERN ALLIANCE BANCORPORATION)
• FY2025 10-K: …for 10% or more of consolidated or segment revenues. No material portion of the Company's lending business is seasonal. However, seasonality in the Company's mortgage warehouse deposits may impact lending activities. Competition The financial services industry is highly competitive and has been significantly impacted…
• FY2025 10-K: …competitive pressure from the introduction of new technologies such as blockchain and digital payments, often by non-traditional competitors and financial technology companies. Among other things, technology and other changes are allowing customers to complete financial transactions that historically have involved…
• CBSH (COMMERCE BANCSHARES, INC.)
• FY2025 10-K: …of credit policies of monetary and fiscal authorities, the Company makes no prediction as to possible future changes in interest rates, deposit levels or loan demand, or their effect on the financial statements of the Company. The financial industry operates under laws and regulations that are under regular review by…
• FY2025 10-K: …sheet. The Company's goal is to be the preferred provider of financial services in its communities, based on strong customer relationships built through providing top quality service with a strong risk management culture, and employing a strong balance sheet with strong capital levels. The Company operates under a…
• WBS (WEBSTER FINANCIAL CORPORATION)
• FY2025 10-K: …found within Note 13: Regulatory Capital and Restrictions in the Notes to Consolidated Financial Statements contained in Part II - Item 8. Financial Statements and Supplementary Data. 61 Table of Contents Sources and Uses of Funds Sources of Funds. Deposits are the primary source of cash flows for the Bank's lending…
• FY2025 10-K: …Banking, Asset Based Lending and Commercial Services, and Treasury Management. Commercial Banking's Private Banking team also pairs holistic wealth solutions, including tailored lending, with commercial banking services. Healthcare Financial Services includes HSA Bank and Ametros. HSA Bank is one the country's…
• COLB (COLUMBIA BANKING SYSTEM, INC.)
• FY2025 10-K: …these loans. The Bank recognizes the credit risks inherent in dealing with other depository institutions. Accordingly, to prevent excessive exposure to any single correspondent, the Bank has established general standards for selecting correspondent banks as well as internal limits for allowable exposure to any single…
• FY2025 10-K: …our strategic branch locations, and the long-standing community presence of our associates, we believe we are well positioned to attract new customers while not only retaining existing customers but also deepening our relationships with them. We focus on balanced, relationship-driven growth in loans, deposits, and…
• BANF (BancFirst Corporation)
• FY2025 10-K: …business, growth and profitability. Financial services institutions are interrelated because of trading, clearing, counterparty or other relationships. We have exposure to many different industries and counterparties, and routinely execute transactions with counterparties in the financial services industry, including…
• FY2025 10-K: …bank, purchase the assets or assume the deposits of another bank. In determining whether to approve a proposed bank acquisition or merger, bank regulatory authorities will consider, among other factors, the competitive effect and public benefits of the transactions, the capital position of the combined organization,…

Securities Business Segment (reported)

• LPLA (LPL Financial Holdings Inc.)
• FY2025 10-K: …classified any investments as available-for-sale. Securities classified as trading are carried at fair value while securities classified as held-to-maturity are carried at amortized cost. The Company uses prices obtained from independent third-party pricing services to measure the fair value of its trading…
• FY2025 10-K: …portion of our clearing deposit requirements at various clearing organizations, to track the performance of our research models and in connection with our dividend reinvestment program. Trading securities are included in investment securities while securities sold, but not yet purchased are included in other…
• SF (STIFEL FINANCIAL CORP)
• FY2025 10-K: …settle within one business day after trade date. Should a customer or broker fail to deliver cash or securities as agreed, we may be required to purchase or sell securities at unfavorable market prices. We borrow and lend securities to facilitate the settlement process and finance transactions, utilizing customer…
• FY2025 10-K: …7.6 million. We utilize the share repurchase program to manage our equity capital relative to the growth of our business and help to meet obligations under our employee benefit plans. Liquidity Risk Management Our businesses are diverse, and our liquidity needs are determined by many factors, including market…
• RJF (RAYMOND JAMES FINANCIAL INC)
• FY2025 10-K: …and our Capital Markets group's ability to find attractive investment opportunities for clients. In certain cases, we transact on a principal basis, which involves the purchase of financial instruments from, and the sale of financial instruments to, our clients as well as other dealers who may be purchasing or…
• FY2025 10-K: …of our securities brokerage operations. Our information technology department develops and supports the integrated solutions that provide a customized platform for our businesses. These include a platform for financial advisors designed to allow them to spend more time with their clients and enhance and grow their…
• SCHW (SCHWAB CHARLES CORP)
• FY2025 10-K: "Through Clients' Eyes" strategy, striving to meet the needs of our diverse client base, while driving growth across multiple fronts and successfully completing the integration of Ameritrade Holding LLC and its consolidated subsidiaries (collectively referred to as Ameritrade). Amid easing inflation, the Federal…
• FY2025 10-K: …arising from client transactions or a minimum dollar requirement, which is based on the type of business conducted by the broker-dealer. Under the alternative method, a broker-dealer may not repay subordinated borrowings, pay cash dividends, or make any unsecured advances or loans if such payment would result in a…
• IBKR (INTERACTIVE BROKERS GROUP, INC.)
• FY2025 10-K: …taxes and net income as reported on the consolidated statements of comprehensive income. The Company's CODM is its Chief Executive Officer and President. The brokerage segment provides execution, clearing and settlement of trades globally for hedge and mutual funds, ETFs, registered investment advisors, proprietary…
• FY2025 10-K: …yields on segregated cash and customer credit balances as effective interest rates in those currencies move above or below zero. We earn income on securities loaned and borrowed to support customer long and short stock holdings in margin accounts. A securities lending transaction generates (1) net interest earned on…
• SEIC (SEI INVESTMENTS COMPANY)
• FY2025 10-K: …LSV Asset Management (LSV), an RIA that specializes in value equity management for its clients. Business segments overview Our business segments are generally organized around our target markets. Financial information about each business segment is contained in "Note 12. Business Segment Information" included in our…
• FY2025 10-K: …agent, investment advisor, distributor, and shareholder servicer for many of these products. We are actively converting mutual fund assets to ETF structures to meet client demand for more attractive, flexible vehicles. Recent launches and conversions, such as the SEI DBi Multi-Strategy Alternative ETF (QALT),…

Methodology Note

• Priced-in inversion: the valuation is inverted on the current price to recover the operating-income growth, duration, and steady-state margin the price embeds (ROE for financials, FFO growth for REITs).
• Valuation x-ray: the valuation models, grouped into four families (asset, earnings, relative, growth). Each model is expressed as a price/FV ratio (distance from price), not a point fair-value estimate. The spread across families is the disagreement.
• Economic-unit decomposition (SOTP): each disclosed business unit is assigned its native valuation basis before any multiple is applied. Operating units are valued on enterprise value; funded financial units are valued on their own common equity, because their borrowings fund earning assets rather than levering the parent. A company total is stated only once every material unit carries a supported value and the parent capital bridge reconciles.
• Solvency: net cash/debt, net-debt-to-NOPAT, interest coverage, and share-count CAGR from EDGAR financials (net debt / FFO and fixed-charge coverage for REITs; regulatory-capital framing for financials).
• Peer cohorts: per-segment comparables with deep-linkable SEC filing citations.

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.