LexinFintech Up 3.8% after Earnings

in EARNINGS/INVESTING IDEAS/MARKET MOVING by

LexinFintech Holdings Ltd. (NASDAQGM:LX) is consumer finance platform for educated young adults in China. LexinFintech reported Q3 earnings results this morning on November 18, 2019. Total operating revenue reached RMB3.2 billion. At the time of this writing, the stock price is $12.98/share, up 3.84% for the day.

Key highlights from the strong earnings report are as follows:

  • Financial services income reached RMB2.2 billion ($313 million), increasing 76.0% from the third quarter of 2018.
  • Loan facilitation and servicing fees in financial services income reached RMB1.9 billion ($270 million), increasing 238% from the third quarter of 2018.
  • Gross profit reached RMB1.7 billion ($242 million), representing an increase of 122% from the third quarter of 2018.
  • Net income was RMB724 million ($103 million), representing an increase of 62.0% from the third quarter of 2018.

Earnings Call Trends

Historically, management has exceeded analyst expectations 3 out of the last 6 tracked quarters, and missed expectations 3 quarters.

Analyst Expected vs Reported EPS
Quarter Expected Reported Surprise Result
Q1, 2019 $0.45 $0.51 14.3% Beat
Q4, 2018 $0.36 $0.58 62.8% Beat
Q3, 2018 $0.26 $0.28 6.9% Beat
Q2, 2018 $0.23 $0.21 -7.5% Missed
Q1, 2018 $0.15 $0.08 -48.3% Missed
Q4, 2017 $0.12 $0.10 -16.9% Missed

In the following table, we summarize the company’s stock price movements after earnings releases. The “Price Day Prior” column shows the closing stock price on the day before the earnings report, and the “Price Next Day” column shows the stock price at the end of the trading day after the earnings report.

Stock Price Performance After Earnings
Report Date Price Day Prior Price Next Day Change % Result
2019-08-30 $9.83 $10.25 4.3% Increase
2019-05-17 $13.68 $12.99 -5.0% Decline
2019-03-14 $11.15 $10.53 -5.6% Decline
2018-11-14 $10.17 $10.05 -1.2% Decline

Fundamentals And Technical Analysis

LexinFintech is currently trading at $12.98/share, up 3.84% for the day. The company is trading at approximately 88.5% of its 52 week high of $14.66/share. Prior to today’s report, the company’s stock price was up 27.2% since the last earnings report and up 3.6% over the previous week.

The company’s 14 Day Relative Price Index (RSI) of 78.16 suggests the company is trading in technically overbought territory. The RSI is considered overbought when above 70 and oversold when below 30.

The current share price implies a price-to-earnings (P/E) multiple of 7.1x and a forward P/E multiple of 6.4x. LexinFintech’s current share price also implies a price-to-book (P/B) multiple of 3.0x. The following table summarizes some other key fundamental ratios:

Data as of November 16, 2019
Metric Value
Last Fiscal Period FY2019.Q2
Period End Date June 30, 2019
Stock Price (Current) $12.50
P/E Ratio 7.1x
P/E Ratio (Fwd) 6.4x
PEG Ratio 0.3
Total Debt to Capital (%) 21.3%
Levered Free Cash Flow zero
Enterprise Value / EBITDA 9.5x

Company Profile: LexinFintech Holdings Ltd.

LexinFintech Holdings Ltd. is a mid-cap stock with a market capitalization of $2.234 billion and a total enterprise value of $2.697 billion. The company operates in the Financials sector and Consumer Finance industry.

A few key slides from the the company’s latest investor presentation:

LexinFintech-WhoWeAre-min

LexinFintech-Business-min

LexinFintech Holdings Ltd., through its subsidiaries, operates as an online consumer finance platform for young adults in the People’s Republic of China. The company operates Fenqile.com, a retail and online consumer finance platform that offers installment purchase loans, personal installment loans, and other loan products, as well as provides online direct sales with installment payment terms.

The company also matches customer loans with diversified funding sources, including individual investors on its Juzi Licai online investment platform, third-party commercial banks, consumer finance companies, institutional funding partners in its direct lending programs, investors of its asset-backed securities, and other licensed financial institutions.

The company was formerly known as Staging Finance Holding Ltd. and changed its name to LexinFintech Holdings Ltd. in March 2017. LexinFintech Holdings Ltd. was founded in 2013 and is headquartered in Shenzhen, the People’s Republic of China.

Expertise: financial modeling, mergers & acquisitions. Andy is also a founder at finbox.io, where he’s focused on building tools that make it faster and easier for investors to do investment research. Andy’s background is in investment banking where he led the analysis on over 50 board advisory engagements involving mergers and acquisitions, fairness opinions and solvency opinions. Some of his board advisory highlights: - Sears Holdings Corp.’s $620 mm spin-off via rights offering of Sears Outlet, Hometown Stores and Sears Hardware Stores. - Cerberus Capital Management’s $3.3 bn acquisition of SUPERVALU Inc.’s New Albertsons, Inc. assets. Andy can be reached at andy@finbox.io or at +1 (516) 778-6257.

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