QFIN HOLDINGS INC-ADR (NASDAQ:QFIN) Stands Out as a Quality Investment Candidate

This analysis looks at a possible quality investment candidate found using the Caviar Cruise screening method. Created as a structured way to approach quality investing, this process concentrates on finding companies with solid past results, high profitability, good financial condition, and lasting competitive strengths. The screen uses both simple and more detailed filters to find businesses that show steady revenue and earnings increases, good returns on capital put to use, acceptable debt amounts, and the skill to turn profits into free cash flow.

Meeting the Core Quality Criteria

QFIN HOLDINGS INC-ADR (NASDAQ:QFIN) shows a good fit with the basic ideas of quality investing as described by the Caviar Cruise method. The company's financial numbers in many important areas indicate it has the traits that quality investors usually look for in long-term investments.

Growth and Profitability Metrics

The Caviar Cruise method focuses on both revenue increase and profit expansion as signs of a company's capacity to grow successfully. QFIN displays notable results in these areas:

, Revenue Growth (5Y CAGR): 8.48% , going beyond the 5% minimum level , EBIT Growth (5Y CAGR): 21.07% , greatly exceeding the 5% requirement , EBIT Growth > Revenue Growth: The large lead of EBIT growth compared to revenue growth points to better operational effectiveness and possible pricing strength

The reality that EBIT growth greatly leads revenue growth is especially significant, as this implies the company is reaching scale benefits or has pricing strength , both signs of quality businesses with lasting competitive edges.

Capital Efficiency and Returns

Return on invested capital is a central measure for quality investors, showing how well management uses shareholder money. QFIN's results here are strong:

, ROIC (Excluding Cash, Goodwill & Intangibles): 19.25% , well over the 15% minimum level , This return level shows very good capital use effectiveness and implies the company works with important competitive edges

Leaving out cash, goodwill, and intangibles from this math gives a better view of the returns made from the main operational assets, which makes the 19.25% number especially notable.

Financial Health and Cash Flow

Quality investing favors companies with solid financial foundations and dependable cash production. QFIN shows very good condition in these parts:

, Debt to Free Cash Flow: 0.58 , meaning the company could pay back all its debt in under seven months using present FCF , Profit Quality (5Y Average): 141.63% , far above the 75% minimum requirement

The very low debt-to-FCF number points to little financial danger, while the profit quality figure over 100% shows the company creates more free cash flow than accounting profit , an uncommon and positive feature that offers financial room for dividends, share repurchases, or strategic spending.

Fundamental Analysis Overview

The full fundamental analysis report gives QFIN a total rating of 8 out of 10, placing it well in the Consumer Finance field. Main advantages found include:

, Profitability Score: 8/10 , With very high margins and returns that do better than most field competitors , Health Score: 8/10 , Showing good debt and cash positions , Valuation Score: 9/10 , Implying the stock is priced at good multiples compared to earnings and cash flow

The analysis points out excellent results across margin measures, with profit margin of 38.67% and operating margin of 44.19% both placed in the high end of the field. The valuation review mentions especially good price-to-earnings ratios that are much lower than field and S&P 500 averages.

Additional Quality Considerations

Beyond the countable measures, quality investors often judge non-numerical points that might help with long-term success. As a Chinese fintech company working in the consumer finance area, QFIN gains from several structural benefits:

, The company works inside the increasing digital loan system in China, using technology to enable credit services , Its platform-based way of doing business shows growth features , The company helps financial institution partners through different service types, giving income variety

While country-related thoughts and rule settings need watching, the company's operational measures imply it has built a lasting business model inside its market.

Exploring Additional Opportunities

For investors wanting to find other companies that fit the Caviar Cruise quality rules, the complete screening results give a wider group of possible quality investments. The screen can be changed further based on particular investment likes or extra rules.

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Disclaimer: This article presents objective analysis based on publicly available data and established screening methodologies. It does not constitute investment advice, recommendation, or endorsement of any security. Investors should conduct their own research and consider their individual financial circumstances, risk tolerance, and investment objectives before making any investment decisions. Past performance does not guarantee future results.