X Financial ADR (NYSE:XYF) Meets Key Peter Lynch Investment Criteria

Investors looking for long-term growth chances at fair prices often use established methods like the Peter Lynch strategy. This method, explained in Lynch's book One Up on Wall Street, stresses fundamental analysis and a long-term buy-and-hold view. It centers on finding companies with lasting earnings growth, good financial condition, and fair prices, avoiding both speculative high-priced stocks and inactive businesses. The method mixes parts of growth and value investing, focusing on businesses that are profitable, easy to grasp, and trading at prices that do not overstate their future possibilities. By using specific filters for earnings growth, price ratios, debt amounts, and profit generation, investors can methodically find possible choices that fit Lynch's ideas.

Meeting Peter Lynch Criteria

X Financial ADR (NYSE:XYF) displays several traits that match closely with the filters used in a Peter Lynch-based screen. The company's financial numbers meet or pass the main limits Lynch supported for finding good growth at a fair price.

• Earnings Per Share Growth: XYF has reached an average EPS growth of 16.75% over the last five years. This fits directly into Lynch's desired span of 15% to 30%, showing a history of steady, lasting growth that is not overly sharp to be unstable.
• PEG Ratio: The company's PEG ratio, which matches its Price-to-Earnings ratio to its growth rate, is very low at 0.15. A number under 1.0 is a basic part of the Lynch method, indicating that the stock could be priced low compared to its earnings growth chance.
• Debt-to-Equity Ratio: With a Debt-to-Equity ratio of 0.41, XYF keeps a careful capital setup. This is easily under the screen's limit of 0.6 and matches Lynch's liking for companies that are not too dependent on debt funding, lowering money risk.
• Current Ratio: The Current Ratio of 1.59 shows a good level of short-term cash availability, passing the needed lowest point of 1.0. This implies the company is in a good state to handle its near-term duties, a main sign of money steadiness.
• Return on Equity: XYF's ROE of 22.63% is much higher than the 15% minimum. A high ROE is a key gauge of profit generation for Lynch, showing that leadership is effectively creating earnings from shareholders' money.

Fundamental Analysis Overview

A full fundamental analysis of X Financial gives the company a total score of 5 out of 10. This score places XYF in the middle group inside the busy Consumer Finance field, but it shows a picture with clear strong points and weak points that long-term investors should think about.

The company's most interesting feature is its outstanding profit generation, which gets a high score of 8 out of 10. XYF has field-leading margins and returns, including a Return on Invested Capital (ROIC) of 33.84% that does better than almost 95% of similar companies. This good profit generation backs the Lynch focus on effective and profitable businesses. Regarding price assessment, XYF gets a 4, mainly because of its very low P/E ratio of 2.45, which makes it much less expensive than the wider market and most of its field rivals. The growth score is also a 4, backed by good past growth in both earnings and income, though a shortage of available future guesses from experts brings some doubt. The main point for care is financial condition, which scores a 5, as the company's Altman-Z score hints it is in a "grey area," though still doing better than many field peers in terms of debt and cash availability.

Investment Considerations

For investors following the Peter Lynch view, X Financial offers an interesting case. It successfully meets a screen made to locate companies with confirmed growth, fair prices, and solid financials. The very low PEG ratio is especially notable, as it implies the market could be greatly pricing low the company's growth path. The high ROE and profit margins point to a high-grade business operation, while the workable debt level matches a careful risk picture.

However, the mixed financial condition score and the absence of expert coverage for future guesses are items that call for more individual checking, following Lynch's suggestion to completely understand a business before investing. The company's place in the online personal finance area in China also means investors must be at ease with the connected country-political and rule-making setting.

Find More Possible Investments

The Peter Lynch screen is a useful beginning step for finding companies that match a structured, long-term growth plan. X Financial was found using this method, and you can locate other possible choices by looking at the Peter Lynch Strategy stock screener.

Disclaimer: This article is for information reasons only and does not form financial guidance, a suggestion, or a deal or request to purchase or sell any securities. The information shown should not be used as the only base for making any investment choice. Investors should do their own separate study and talk with a skilled financial guide before making any investment.