FRHC

We rate Freedom Holding Corp. (FRHC) as a Reduce with a composite score of 44.8/100 at a current price of $118.51. The quantitative profile shows weakness across multiple dimensions, suggesting limited upside potential and elevated risk of underperformance relative to peers over the next 12 months.

The rating is primarily driven by strength in quality (82th percentile) and value (64th percentile), which together account for the majority of the composite score. Offsetting weakness in momentum (14th percentile) and stability (23th percentile) tempers our overall conviction. We assign a No Moat rating (33/100), Very High uncertainty, and Poor capital allocation.

Key items to watch: momentum to confirm whether the current price trend has legs; balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

Freedom Holding Corp. holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 44.8/100 places it at rank #2827 in our full 7,333-stock universe. With a $10.2B market capitalization, Freedom Holding Corp. operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Revenue contraction of -4% combined with momentum at the 14th percentile paints a cautious picture of the near-term business outlook. The market appears to be pricing in continued challenges, and a catalyst for reversal is not clearly visible from current data.

The margin cascade tells an important story: gross margins of 97% (+20.2pp vs sector) narrow to operating margins of 10% (-6.6pp vs sector) and net margins of 7.7%, yielding a gross-to-net conversion rate of 8%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $118.51, Freedom Holding Corp. is trading near fair value based on current fundamentals. Our value factor score of 64/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 41.7x (a 249% premium to the sector median of 11.9x), EV/EBITDA of 23.5x (at a premium), P/B of 5.3x, P/S of 3.3x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis partially supports given strong quality metrics.

We assign a Very High uncertainty rating to Freedom Holding Corp.. The stock exhibits multiple compounding risk factors: significant leverage (787% debt-to-equity), below-average price stability (23th percentile), elevated valuation multiple (P/E 41.7x) that leaves limited margin for error. The extreme uncertainty around future cash flows makes precise valuation difficult, and the range of outcomes is exceptionally wide. Only investors with high risk tolerance and extended time horizons should consider this name.

Specific risk factors that inform our assessment include: significant leverage (787% debt-to-equity); below-average price stability (23th percentile); elevated valuation multiple (P/E 41.7x) that leaves limited margin for error. Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 23th percentile and quality factor at the 82th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 97% provide a buffer against cost pressures. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate Freedom Holding Corp.'s capital allocation as Poor. Key concerns include elevated leverage (787% D/E), weak asset returns (ROA 1.4%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — Freedom Holding Corp. significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, Freedom Holding Corp. receives a Reduce rating with a composite score of 44.8/100 (rank #2827 of 7,333). Our quantitative framework assigns a No Moat (33/100, trend: stable), Very High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 43/100.

Our analysis does not support a constructive view on Freedom Holding Corp. at this time. The combination of limited competitive advantages, very high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.