Propelled by rapidly rising interest rates, 2022 was a dreadful year for the stock market. But 2023 has so far been a positive environment for investors, with the Nasdaq Composite index up 31% (as of Aug. 14). 

Some stocks, like SoFi Technologies (SOFI -1.24%), have performed substantially better than the index. The fintech company's shares are up a whopping 88% this year, even though they have dropped 16% since the start of August. 

This means a $1,000 investment made on Jan. 1 would be worth nearly $1,900 today. That's a fantastic return in such a short amount of time. 

Let's dive deeper into this online-only banking institution to figure out what's behind the stock's stellar performance. 

Financial results 

The shares received a huge boost following SoFi's upbeat Q2 financial results. Revenue was up 37% year over year, and the net loss was cut in half to $47.5 million versus the year-ago period. Moreover, not only did management raise its full-year guidance, but it also thinks the business can reach profitability on a GAAP (generally accepted accounting principles) basis in the fourth quarter this year. For a company that has consistently lost money throughout its existence, the positive news was certainly something that can excite investors and help send the stock higher. 

A potential tailwind 

When it was announced that the original plan to have student loans forgiven was rejected by the Supreme Court on June 30, and that these payments for borrowers would resume in October, SoFi's shares surged. They were up 37% following that news through the end of July. 

Why would SoFi benefit from this ruling? Well, investors can't forget that the business's entire founding was based on making education more affordable. Refinancing student loans was SoFi's original bread-and-butter product offering. And there could be renewed activity as payments resume and consumers seek ways to relieve their burdens, especially as they might start to struggle with buying essential items. 

Through the first six months of 2023, SoFi originated just over $900 million in student loans. It's not hard to believe that this could pick up meaningfully toward the end of the year, which would result in higher revenue for the business. 

A potential headwind 

Starting with the second quarter of 2021 and continuing in every single three-month period since, SoFi has originated more personal loans than student loans, a trend that has become even more pronounced starting in 2022. In the most recent quarter, $3.7 billion of personal loans were approved by SoFi, representing 85% of all originations. And as of June 30, the company had $12.2 billion of unpaid principal from personal loans. 

Because of the ability to produce higher interest income, generating more loan activity is an obvious part of the game plan for a bank like SoFi. However, soaring personal loan originations could be a harbinger of potential risks down the road. These loans are unsecured, making them riskier because the business doesn't have any collateral to protect the downside. They could be indicative of consumers struggling to manage their finances in an uncertain economic environment. And perhaps more worrying, if a severe recession does end up happening, defaults could skyrocket very quickly, leading SoFi to post sizable losses. 

Is the stock a buy? 

It's hard to deny that SoFi is benefiting from strong momentum in 2023, as is reflected in the stock's performance. But investors should think things through if they are seriously considering buying shares right now. On the one hand, the digital bank could gain as student loan refinances pick up, but it could hurt financially if borrowers struggle with personal loan payments. 

And at a price-to-sales multiple of 4.3 right now, the stock is much more expensive than it was at the start of the year. The valuation is also something to incorporate into your analysis.