Qifu Technology, Inc. QFIN stock has shown remarkable growth over the past six months. The stock has skyrocketed 93.9%, outperforming the 42.1% rally of the industry and 14.6% growth of the Zacks S&P 500 composite.
QFIN’s performance is significantly higher than its competitors, SLM Corporation SLM and Credit Acceptance Corporation CACC. SLM and CACC have gained 33.9% and 3.4% for the same period, respectively.
Six Months Price Performance
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As of the last trading session, the stock closed at $37.9, 6% up from the 52-week high of $35.8. QFIN is trading above its 50-day moving average, indicating a bullish sentiment among investors.
Given the remarkable upsurge in the Qifu stock, investors might be inclined to buy it. However, the lingering question prevails whether it is the right time to jump on the bandwagon and buy the stock. Let us find out.
Economic Stimulus to Boost QFIN’s Lending Services Demand
In September 2024, the People’s Bank of China (PBOC) reduced the reverse repurchase rate to 1.5% from 1.7% to boost the economy. It also lowered the Required Reserve Ratio (RRR) for major banks to 9.5% from 10%. The reduction in RRR adds to the liquidity in the banking system, which lowers the cost of lending. Borrowers are attracted to lending money as the cost of loans becomes less expensive.
A reduction in RRR allows banks to hold more money to lend to borrowers, giving these banks more flexibility. The aforementioned stimulus measures can lead to increasing lending, leading to stronger demand for QFIN’s lending-based services.
One should keep in mind that PBOC can announce additional stimulus in the upcoming months, which could further improve Qifu Technology’s lending demand in the long run.
QFIN’s Tech-Driven Approach Looks Promising
QFIN has been focusing on creating a comprehensive credit tech platform to cater to the rising needs of financial institutions and borrowers. The platform is based on risk profiles and values of users, which aids financial institutions in underwriting efficiently from enhanced user profiling and asset matching. Borrowers benefit from this platform as it provides an array of diverse financial institutions and a larger breadth of prices. The company improved its user loyalty program with additional benefits to promote retention for the long term.
Hefty investments are being made by the company to incorporate AI to enhance user experience and augment operational efficiency. Qifu Technology has upgraded more than 10 modules in its AI copilot system to increase efficiency. The company anticipates the system to deal with 100,000 calls per day. It is invested in improving the capabilities of its chatbots and communication efficiency. Enhancements include boosting the number of exchanges per call and the frequency of script iteration.
Qifu Technology Stock Looks Cheap
The QFIN stock is currently cheap and appealing to investors. It is priced at around 6.3 times forward 12-month earnings per share, which is lower than the industry’s average of 38.6 times. When looking at the trailing 12-month EV-to-EBITDA ratio, QFIN is trading around 4.2 times, far below the industry’s average of 49.1 times.
Image Source: Zacks Investment Research
Image Source: Zacks Investment Research
QFIN’s Robust Returns on Capital
Return on equity (ROE), a measure of profitability, reflects how effectively a company uses its shareholders' investments to generate earnings. QFIN’s trailing 12-month ROE is 24.4% compared with the industry’s average of 11%.
Qifu Technology has also shown strong returns on invested capital (ROIC), with a trailing 12-month ROIC of 16.1%, way higher than the industry average of 5%.
Qifu Technology’s Liquidity Outpaces Industry
The company has a strong liquidity position, with the current ratio of 2.56 at the end of the third quarter of 2024, way more than the industry’s 0.85. A current ratio above 1 suggests that the company can easily pay off its short-term obligations.
QFIN’s Strong Top & Bottom-Line Prospects
The Zacks Consensus Estimate for the company’s 2024 revenues is pegged at $2.3 billion, indicating 1.8% growth from the year-ago reported level. For 2025, the top line is anticipated to increase 3.7% year over year.
The consensus estimate for earnings in 2024 is pegged at $5.3 per share, implying a 43.8% increase from the prior year's actual. For 2025, the bottom line is anticipated to grow 8.6% on a year-over-year basis.
Hurry Up & Buy QFIN Now
Qifu Technology has positioned itself to benefit from the recent economic stimulus. QFIN’s inclination toward developing customer-centric technology to enhance overall efficiency is a favorable marker for its prospects. The stock looks cheap, provides returns on capital greater than the industry and has a strong liquidity position. Its strong top and bottom-line outlook is encouraging.
We believe that the positive factors make Qifu Technology a deserving candidate for your long-term portfolio. Hence, investors should buy the stock now.
QFIN currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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