The OLB Group, Inc. (OLB - Get Rating) is an up-and-coming fintech and payment facilitator (PayFac) operating in the United States. Its clientele consists of more than 85,000 merchants across 130 industry types. The company went public in August last year through the traditional IPO process. However, the stock failed to gain significant investor attention due to its limited market reach and bleak financials. Shares of OLB have gained 5.6% over the past year and 3.9% year-to-date.

However, the stock has gained 22.7% over the past five days, driven by the news of its wholly-owned subsidiary DMint, Inc.’s upcoming cryptocurrency data center launch. This development marks OLB’s entry into the green cryptocurrency industry. Its data centers are expected to begin crypto mining operations from mid-September. This should bring in an additional $3 million in revenues for OLB. However, given the operating costs of such green crypto mining data centers, OLB’s negative profit margins might worsen.

Here’s what could shape OLB’s performance in the near term:

Entry into the Cryptocurrency Industry

OLB formed a cryptocurrency mining company DMint in early August to mine cryptocurrency through data centers powered by underutilized energy under the ESG standards. Regarding this, OLB CEO Ronny Yakov said, “DMint will strategically enter the cryptocurrency mining business, using a cost-efficient and green business model, which will significantly enhance OLB revenues. This new revenue source will also fuel new services and opportunities for our small- and medium-sized merchants.”

This launch should enable the omnichannel commerce company to capitalize on the current cryptocurrency mania. OLB plans to set up DMint as a vertically integrated crypto mining company on all-natural gas-powered data centers.

While the green cryptocurrency industry has a promising future, it might take some time to materialize. The Senate-approved $1 trillion infrastructure bill focusing on clean energy initiatives does not include any provisions about the green cryptocurrency industry. In addition, with substantial taxes on crypto investments, it will likely take some time for OLB to profit from such expansions.

Increasing Expenses

As a relatively new player in the finance and cryptocurrency industry, OLB is focused on accelerating its growth to strengthen its market presence and financials. This is evident from its 41.7% year-over-year increase in revenues to $2.83 million in the fiscal second quarter ended June 30. However, the company is currently neglecting its operational inefficiencies resulting in a substantial increase in costs, thereby increasing its loss margins.

OLB’s processing and servicing costs increased 62.1% from the same period last year to $2.10 million in the second quarter. In comparison, its general and administrative expenses rose 122.7% from the year-ago value to $848,368. Net loss came in at $666,136, up 30.5% from the prior year’s quarter.

POWR Ratings Reflect Bleak Prospects

OLB has an overall rating of D, which translates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

OLB has a D grade for Stability and Quality. Its negative 0.41 beta and negative net profit margin justify the Stability and Quality grades, respectively.

Of the 147 stocks in the D-rated Software – Application industry, OLB is ranked #125.

In addition to the grades I’ve highlighted, you can view OLB ratings for Momentum, Sentiment, Growth, and Value here.

Bottom Line

OLB is set to begin mining cryptocurrency through its subsidiary from mid-September. However, the mining success of its newly established subsidiary DMint is yet to be determined. Moreover, OLB’s negative profit margins are expected to worsen due to the operational expenses of its newest subsidiary, indicating negative shareholder returns. Thus, the stock is best avoided now.

How Does The OLB Group (OLB) Stack Up Against its Peers?

While OLB has a D rating in our proprietary rating system, you might want to consider taking a look at its industry peers, Open Text Corporation (OTEX - Get Rating), Commvault Systems, Inc. (CVLT - Get Rating), and National Instruments Corporation (NATI - Get Rating), which have an A (Strong Buy) rating.

OLB shares were trading at $5.02 per share on Thursday afternoon, down $0.11 (-2.14%). Year-to-date, OLB has gained 1.62%, versus a 21.04% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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