X FINANCIAL-ADR (NYSE:XYF) stands out as a potential candidate for investors seeking growth at a reasonable price (GARP). The company, a Chinese fintech platform specializing in personal finance services, meets several key criteria from Peter Lynch’s investment strategy, including sustainable earnings growth, solid profitability, and an attractive valuation.
Key Strengths of XYF
- Earnings Growth: XYF has delivered a 5-year average EPS growth of 16.75%, aligning with Lynch’s preference for sustainable but not excessive growth (15-30% range).
- Profitability: The company’s return on equity (ROE) of 21.99% is well above the 15% threshold Lynch favored, indicating efficient use of shareholder capital.
- Valuation: With a PEG ratio of 0.20 (far below Lynch’s upper limit of 1), XYF appears undervalued relative to its growth. Its P/E ratio of 3.42 is also significantly lower than industry and S&P 500 averages.
- Financial Health: A debt-to-equity ratio of 0.34 and a current ratio of 1.50 suggest a stable balance sheet with manageable leverage and liquidity.
Fundamental Analysis Overview
XYF’s fundamental rating of 5/10 reflects a mix of strengths and areas for caution. The company excels in profitability, with high margins (62.29% operating margin) and strong returns on capital (ROIC of 32.59%). However, limited dividend history and lack of forward earnings estimates introduce some uncertainty.
For a deeper dive, review the full fundamental analysis report.
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Disclaimer
This is not investing advice. The observations here are based on data available at the time of writing. Always conduct your own research before making investment decisions.
