QIFU TECHNOLOGY INC (NASDAQ:QFIN) – A Quality Stock with Strong Fundamentals

QIFU TECHNOLOGY INC (NASDAQ:QFIN) stands out as a potential candidate for quality investors, meeting key criteria for profitability, growth, and financial health. The company operates in China’s consumer finance sector, providing credit technology services with a focus on sustainable growth and efficiency.

Key Strengths

• High Return on Invested Capital (ROIC): QFIN’s ROIC (excluding cash and goodwill) stands at 21.86%, well above the 15% threshold for quality stocks. This indicates efficient use of capital to generate profits.
• Strong Revenue and EBIT Growth: Over the past five years, revenue has grown at an annualized rate of 8.48%, while EBIT growth has been even stronger at 21.07%, signaling improving profitability.
• Low Debt Burden: The company’s debt-to-free cash flow ratio is just 0.60, meaning it could repay all debt in less than a year using current cash flows—a sign of financial strength.
• High Profit Quality: With a five-year average profit quality of 141.63%, QFIN converts net income into free cash flow at an exceptional rate, reinforcing earnings reliability.
• Attractive Valuation: Trading at a P/E ratio of 6.34, QFIN appears undervalued compared to industry peers and the broader market.

Fundamental Analysis Summary

Our fundamental report assigns QFIN a rating of 8 out of 10, highlighting its strong profitability, solid growth, and healthy balance sheet. Key takeaways:

• Profitability: High margins (Operating Margin of 45.98%, Profit Margin of 38.98%) place QFIN in the top tier of its industry.
• Liquidity & Solvency: A current ratio of 3.08 and low debt-to-equity ratio (0.27) reflect financial stability.
• Growth Outlook: Analysts expect EPS to grow 16.23% annually, supported by an 8.48% projected revenue growth.

For investors seeking quality stocks with a combination of growth, profitability, and reasonable valuation, QFIN presents a compelling case.

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Disclaimer

This is not investing advice. The observations here are based on current data, but investors should conduct their own research before making decisions.