The financial sector is booming thanks to the Internet's expanding reach, more transparent rules from regulators, tech upgrades boosting efficiency and compliance, smarter risk management, and favorable government policies. In addition, consumers are choosing digital options for banking, payments, investing, and insurance, fueling the industry's expansion.
Amid this backdrop, investors could consider buying fundamentally strong financial stocks Qifu Technology, Inc. (QFIN), Noah Holdings Limited (NOAH), Grupo Supervielle S.A. (SUPV), and Yiren Digital Ltd. (YRD), currently trading at a discounted valuation.
The financial services sector is pivotal for the economy because of the crucial services it provides. Digital accessibility, internet penetration, rising disposable incomes, growing credit needs, and higher consumer spending will likely drive the sector’s growth.
Financial services companies thrive on sustainable and ethical practices, market expansion, collaborations, and product development. Advanced technologies like AI, data analytics, blockchain, and cloud solutions improve user experiences and enhance efficiency, risk management, innovation, customer satisfaction, and competitiveness, further propelling sector expansion.
The global consumer finance market is expected to reach $1.96 trillion by 2029, growing at a CAGR of 7.1%. Furthermore, the financial services market is projected to grow at a CAGR of 7.6% to reach $44.93 trillion by 2028.
Considering these conducive trends, let’s analyze the fundamental aspects of the four financial stocks.
Qifu Technology, Inc. (QFIN)
Headquartered in Shanghai, the People's Republic of China, QFIN and its subsidiaries operate a credit-tech platform under the 360 Jietiao brand in the People's Republic of China. It provides credit-driven services and platform services.
In terms of forward non-GAAP P/E, QFIN’s 4.64x is 56.9% lower than the 10.77x industry average. Its 0.35x forward non-GAAP PEG is 72.5% lower than the 1.27x industry average. Likewise, QFIN’s 0.87x forward Price/Book is 18.2% lower than the 1.07x industry average.
QFIN’s total net revenue for the fourth quarter which ended December 31, 2023, increased 15.1% year-over-year to RMB4.50 billion ($622.19 million). Its non-GAAP income from operations rose 32.8% over the prior-year quarter to RMB1.32 billion ($182.99 million).
For the same quarter, the company’s non-GAAP net income attributable to shareholders of QFIN and non-GAAP net income per ADS attributable to ordinary shareholders of QFIN came in at RMB1.15 ($159.76 million) and RMB7.14, respectively, up 25% and 25.4% year-over-year.
Analysts expect QFIN’s EPS for the fiscal 2024 to increase 11.4% year-over-year to $4.22. QFIN’s stock has gained 31.1%% over the past three months to close the last trading session at $19.59.
QFIN’s POWR Ratings reflect strong prospects. It has an overall rating of A, translating to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Sentiment, and Quality. It is ranked #2 out of 43 stocks in the B-rated Consumer Financial Services industry. In total, we rate QFIN on eight different levels. Beyond what we stated above, we also have given QFIN grades for Growth, Momentum, and Stability. Get all of QFIN’s ratings here.
Noah Holdings Limited (NOAH)
Headquartered in Shanghai, People's Republic of China, NOAH and its subsidiaries provide wealth and asset management services, focusing on investment and asset allocation services for high-net-worth individuals and enterprises internationally. They operate through three segments: Wealth Management, Asset Management, and Other Services.
In terms of forward EV/Sales, NOAH’s 0.37x is 86.9% lower than the 2.83x industry average. Its 1.07x forward EV/EBITDA is 89.3% lower than the 10.02x industry average. Moreover, its 1.09x forward EV/EBIT is 90.2% lower than the 11.13x industry average.
For the fiscal fourth quarter that ended on December 31, 2023, NOAH reported net revenue of RMB799.51 million ($110.65 million). Its income from operations increased marginally year-over-year to RMB220.72 million ($30.55 million).
Its adjusted net income attributable to NOAH shareholders and adjusted net income per share stood at RMB233.73 million ($32.35 million) and RMB3.36, up 56.7% and 57% over the prior-year quarter, respectively.
For fiscal 2024, NOAH’s EPS and revenue are expected to increase 11.6% and 5.8% year-over-year to $2.27 and $482.91 million, respectively. Over the past three months, the stock has gained 16.8% to close the last trading session at $14.09.
NOAH’s POWR Ratings reflect a favorable outlook. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has a B grade for Value and Quality. It is ranked #2 out of 9 stocks in the B-rated Foreign Consumer Finance industry. To see NOAH’s Growth, Momentum, Stability, and Sentiment ratings, click here.
Grupo Supervielle S.A. (SUPV)
Based in Buenos Aires, Argentina, SUPV is a financial service holding company that provides various banking products and services in Argentina. The company operates through the Personal & Business Banking, Corporate Banking, Bank Treasury, Consumer Finance, Insurance, Asset Management, and Other Services segments.
In terms of forward Price/Sales, SUPV is trading at 0.67x, which is 73.5% lower than the 2.54x industry average.
SUPV’s net interest income for the fiscal fourth quarter, which ended on December 31, 2023, increased 105.1% year-over-year to ARS137.85 billion ($156.84 million). Its net operating income rose 83.7% from the year-ago value to ARS158.34 billion ($180.15 million).
Moreover, for the same quarter, the company's attributable net income and earnings per ADS came in at ARS22.46 billion ($25.55 million) and ARS 107, respectively, compared to an attributable net loss of ARS2.47 billion ($2.81 million) and a loss per ADS of ARS28 in the prior-year quarter.
Analysts expect SUPV’s EPS and revenue for fiscal 2024 to increase 241.5% and 70.3% year-over-year to $0.86 and $1.16 billion, respectively. Over the past six months, the stock has gained 264.4% to close the last trading session at $7.47.
SUPV’s POWR Ratings reflect its bright prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system.
It has an A grade for Growth and a B for Value and Momentum. It is ranked #3 in the same industry. To access the additional ratings of SUPV for Stability, Sentiment, and Quality, click here.
Yiren Digital Ltd. (YRD)
Based in Beijing, the People's Republic of China, YRD operates an AI-powered platform that provides a suite of financial and lifestyle services in China. The company delivers digital financial services, insurance solutions, and consumption and lifestyle services.
In terms of the trailing 12-month Price/Sales, YRD's 0.67x is 74.9% lower than the 2.66x industry average, and its 0.40x trailing 12-month Price/Book is 64.1% lower than the 1.12x industry average.
YRD’s total net revenue for the fourth quarter that ended December 31, 2023, increased 17.1% year-over-year to RMB1.27 billion ($176.37 million). The company’s net income and net income per ADS stood at RMB571.27 million ($79.06 million) and RMB6.51 per share, up 17.7% and 20.3% year-over-year, respectively.
In addition, the company’s adjusted EBITDA came in at RMB684.84 million ($94.78 million), up 6.2% over the prior-year quarter.
Over the past six months, YRD’s stock has gained 132% to close the last trading session at $5.36.
It’s no surprise that YRD has an overall rating of A, which translates to a Strong Buy in our proprietary POWR Ratings system.
It has an A grade for Value and Quality and a B for Sentiment. It is ranked first in the Foreign Consumer Finance industry. Click here to see YRD’s Growth, Momentum, and Stability ratings.
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QFIN shares were trading at $19.74 per share on Tuesday morning, up $0.15 (+0.77%). Year-to-date, QFIN has gained 28.44%, versus a 9.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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