Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Warren Buffett has mused, 'If you've been playing poker for half an hour and you still don't know who the patsy is, you're the patsy.' When they buy such story stocks, investors are all too often the patsy.
In contrast to all that, I prefer to spend time on companies like LexinFintech Holdings (NASDAQ:LX), which has not only revenues, but also profits. While that doesn't make the shares worth buying at any price, you can't deny that successful capitalism requires profit, eventually. In comparison, loss making companies act like a sponge for capital - but unlike such a sponge they do not always produce something when squeezed.
How Fast Is LexinFintech Holdings Growing Its Earnings Per Share?
Over the last three years, LexinFintech Holdings has grown earnings per share (EPS) like young bamboo after rain; fast, and from a low base. So I don't think the percent growth rate is particularly meaningful. Thus, it makes sense to focus on more recent growth rates, instead. Like a wedge-tailed eagle on the wind, LexinFintech Holdings's EPS soared from CN¥6.65 to CN¥10.86, in just one year. That's a impressive gain of 63%.
I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). I note that LexinFintech Holdings's revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. LexinFintech Holdings shareholders can take confidence from the fact that EBIT margins are up from 17% to 21%, and revenue is growing. That's great to see, on both counts.
In the chart below, you can see how the company has grown earnings, and revenue, over time. To see the actual numbers, click on the chart.
While we live in the present moment at all times, there's no doubt in my mind that the future matters more than the past. So why not check this interactive chart depicting future EPS estimates, for LexinFintech Holdings?
Are LexinFintech Holdings Insiders Aligned With All Shareholders?
I like company leaders to have some skin in the game, so to speak, because it increases alignment of incentives between the people running the business, and its true owners. So it is good to see that LexinFintech Holdings insiders have a significant amount of capital invested in the stock. Notably, they have an enormous stake in the company, worth CN¥573m. That equates to 28% of the company, making insiders powerful and aligned with other shareholders. Very encouraging.
Should You Add LexinFintech Holdings To Your Watchlist?
You can't deny that LexinFintech Holdings has grown its earnings per share at a very impressive rate. That's attractive. Further, the high level of insider ownership impresses me, and suggests that I'm not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. However, before you get too excited we've discovered 2 warning signs for LexinFintech Holdings (1 is a bit concerning!) that you should be aware of.
Although LexinFintech Holdings certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you're looking for.
Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.
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