Why X Financial (NYSE:XYF) Could Have A Place In Your Portfolio
Building up an investment case requires looking at a stock holistically. Today I’ve chosen to put the spotlight on X Financial (NYSE:XYF) due to its excellent fundamentals in more than one area. XYF is a financially-sound company with a a buoyant growth outlook, not yet factored into the price. Below is a brief commentary on these key aspects. If you’re interested in understanding beyond my high-level commentary, take a look at the report on X Financial here.
Flawless balance sheet and undervalued
Investors in search for stocks with room to flourish should look no further than XYF, with its expected earnings growth of 24% underlying the notable 26% return on equity over the next few years leading up to 2021. XYF’s shares are now trading at a price below its true value based on its discounted cash flows, indicating a relatively pessimistic market sentiment. Investors have the opportunity to buy into the stock to reap capital gains, if XYF’s projected earnings trajectory does follow analyst consensus growth, which determines my intrinsic value of the company. Compared to the rest of the consumer finance industry, XYF is also trading below its peers, relative to earnings generated. This further reaffirms that XYF is potentially undervalued.
XYF is financially robust, with ample cash on hand and short-term investments to meet upcoming liabilities. This implies that XYF manages its cash and cost levels well, which is a key determinant of the company’s health. XYF currently has no debt on its balance sheet. It has only utilized funding from its equity capital to run the business, which is typically normal for a small-cap company. Therefore the company has plenty of headroom to grow, and the ability to raise debt should it need to in the future.
Next Steps:
For X Financial, I’ve compiled three pertinent factors you should further examine:
Historical Performance: What has XYF’s returns been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
Dividend Income vs Capital Gains: Does XYF return gains to shareholders through reinvesting in itself and growing earnings, or redistribute a decent portion of earnings as dividends? Our historical dividend yield visualization quickly tells you what your can expect from XYF as an investment.
Other Attractive Alternatives : Are there other well-rounded stocks you could be holding instead of XYF? Explore our interactive list of stocks with large potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at editorial-team@simplywallst.com.
