QIFU TECHNOLOGY INC (NASDAQ:QFIN) - A Strong Candidate for GARP Investors

QIFU TECHNOLOGY INC (NASDAQ:QFIN) emerged from our Peter Lynch-inspired screen as a company that aligns well with the growth-at-a-reasonable-price (GARP) approach. The firm combines solid earnings growth, strong profitability, and a conservative balance sheet—all while trading at an attractive valuation. Below, we examine why QFIN stands out for long-term investors.

Key Strengths

• Sustainable Growth: QFIN has delivered a 5-year average EPS growth of 19.96%, comfortably within Lynch’s preferred range of 15-30%. This indicates steady, manageable expansion rather than overheated growth.
• Attractive Valuation: With a PEG ratio (5Y) of 0.28, the stock is priced well below the Lynch benchmark of PEG ≤ 1, suggesting it’s undervalued relative to its earnings trajectory.
• Strong Profitability: The company’s return on equity (ROE) of 25.9% far exceeds the 15% minimum Lynch sought, reflecting efficient use of shareholder capital.
• Healthy Balance Sheet: A debt-to-equity ratio of 0.06 and a current ratio of 2.45 highlight financial stability, with minimal reliance on borrowing and ample liquidity.

Fundamental Snapshot

Our full analysis rates QFIN an 8/10, citing excellent profitability, low debt, and a cheap valuation. Margins are industry-leading, with a 36.5% net profit margin and 43.9% operating margin. Despite a slight decline in revenue growth expectations, earnings are projected to grow at 16.2% annually over the coming years.

Why It Fits the GARP Strategy

QFIN’s blend of growth, value, and financial health mirrors Lynch’s principles:

• It operates in the steady consumer finance sector, avoiding speculative trends.
• Earnings growth is consistent but not excessive, reducing the risk of unsustainable expansion.
• The low PEG and P/E (6.6) suggest the market hasn’t fully priced in its quality.

For more stocks matching this strategy, explore our Peter Lynch Screen.

Disclaimer

This is not investing advice! The article highlights observations at the time of writing, but you should always conduct your own research before making investment decisions.