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FinVolution Group (NYSE:FINV), which is in the consumer finance business, and is based in China, saw a double-digit share price rise of over 10% in the past couple of months on the NYSE. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Let’s take a look at FinVolution Group’s outlook and value based on the most recent financial data to see if the opportunity still exists.
What's the opportunity in FinVolution Group?
Good news, investors! FinVolution Group is still a bargain right now. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that FinVolution Group’s ratio of 1.81x is below its peer average of 7.85x, which suggests the stock is undervalued compared to the Consumer Finance industry. However, given that FinVolution Group’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from FinVolution Group?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at the company's future expectations. However, with a negative profit growth of -10% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for FinVolution Group. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although FINV is currently undervalued, the negative outlook does bring on some uncertainty, which equates to higher risk. Consider whether you want to increase your portfolio exposure to FINV, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping tabs on FINV for some time, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on FinVolution Group. You can find everything you need to know about FinVolution Group in the latest infographic research report. If you are no longer interested in FinVolution Group, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned.
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