LendingClub is expected to come public in the week ahead as one of the last initial public offerings of 2015. With IPO proceeds expected to be almost $700 million, this one will be closely followed by many consumers, investors and banks who are under competing pressure from the company.

24/7 Wall St. has received a pre-IPO report on LendingClub from Sterne Agee’s financial team. While the report includes neither a formal rating or a formal price target, as you might assume if this was already a public stock, it offers key insight into the operations and what to expect from LendingClub ahead. It also does actually set the stage for a positive IPO reception.

LendingClub is represented as being the world’s largest online peer-to-peer lending marketplace, which matches individual borrowers with individual investors to allow borrowers to get better rates than elsewhere, and to allow investors to get potentially higher returns than traditional financial and lending investment returns.

The company’s IPO pricing was last seen in the $10 to $12 per share range.

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The underwriting group for this LendingClub IPO does not include Sterne Agee. Its syndicate includes Morgan Stanley, Goldman Sachs, Credit Suisse, Citigroup, Allen & Co., Stifel, BMO Capital Markets, William Blair and Wells Fargo. So, here is what the team at Sterne Agee has to say about the coming IPO prospects:

There is very little, in our view, to keep LendingClub from continuing to grow its primary product, a multi-year prime-based installment loan, at rates seen in the past, and over time we expect to see this company market platform touching all areas of the consumer and small business lending equation. Our analysis suggests that the shares are likely to be valued between $13 and $17 per share, above the current filing range of its pending IPO.

LendingClub’s success is driven in part by its orientation as a market manager/servicer that shares the economic benefits of its platform with both borrowers and lenders. Its typical borrower in its standard program is able to reduce its borrowing cost by 680 bps (basis points) and net yields to investors have averaged 8.60%. While currently focused on originating just prime-based installment loans, we see no reason this company’s platform cannot reach out to all aspects of the U.S. consumer and small business loan market, to markets outside this current geography, and to both prime and not-prime borrowers.

Sterne Agee also addressed the company’s earnings outlook and valuation methodology, and the risk factors were listed as well. The firm said:

Our expectations are that by 2017, LendingClub will be able to generate in excess of $1 billion in revenue while meeting targeted contribution and adjusted EBITDA margins of 50% and 40%, respectively. We are estimating cash-based EPS for 2015, 2016, and 2017 of $0.15, $0.53, and $0.75, respectively. Our estimated valuation for these shares is based on targeted valuation multiples applied to 2017’s expected cash-based EPS and adjusted EBITDA.

The largest risk factor facing this company is its reliance on a sponsoring/issuing bank that actually originates its loans and then sells them back to LendingClub’s network of investors. While we think LendingClub’s prime product is viewed highly favorably by regulators, restrictive actions by any of its primary banks could crimp its ability to innovate and continue to grow.

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