Even With A 28% Surge, Cautious Investors Are Not Rewarding Qifu Technology, Inc.'s (NASDAQ:QFIN) Performance Completely

Qifu Technology, Inc. (NASDAQ:QFIN) shares have continued their recent momentum with a 28% gain in the last month alone. The annual gain comes to 162% following the latest surge, making investors sit up and take notice.

Although its price has surged higher, given about half the companies in the United States have price-to-earnings ratios (or "P/E's") above 20x, you may still consider Qifu Technology as a highly attractive investment with its 8x P/E ratio. Although, it's not wise to just take the P/E at face value as there may be an explanation why it's so limited.

With earnings growth that's superior to most other companies of late, Qifu Technology has been doing relatively well. It might be that many expect the strong earnings performance to degrade substantially, which has repressed the P/E. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

View our latest analysis for Qifu Technology

Keen to find out how analysts think Qifu Technology's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Growth For Qifu Technology?

The only time you'd be truly comfortable seeing a P/E as depressed as Qifu Technology's is when the company's growth is on track to lag the market decidedly.

Retrospectively, the last year delivered an exceptional 42% gain to the company's bottom line. However, this wasn't enough as the latest three year period has seen a very unpleasant 5.1% drop in EPS in aggregate. Therefore, it's fair to say the earnings growth recently has been undesirable for the company.

Turning to the outlook, the next year should generate growth of 27% as estimated by the ten analysts watching the company. That's shaping up to be materially higher than the 15% growth forecast for the broader market.

With this information, we find it odd that Qifu Technology is trading at a P/E lower than the market. Apparently some shareholders are doubtful of the forecasts and have been accepting significantly lower selling prices.

The Final Word

Even after such a strong price move, Qifu Technology's P/E still trails the rest of the market significantly. We'd say the price-to-earnings ratio's power isn't primarily as a valuation instrument but rather to gauge current investor sentiment and future expectations.

Our examination of Qifu Technology's analyst forecasts revealed that its superior earnings outlook isn't contributing to its P/E anywhere near as much as we would have predicted. There could be some major unobserved threats to earnings preventing the P/E ratio from matching the positive outlook. At least price risks look to be very low, but investors seem to think future earnings could see a lot of volatility.

There are also other vital risk factors to consider before investing and we've discovered 1 warning sign for Qifu Technology that you should be aware of.

It's important to make sure you look for a great company, not just the first idea you come across. So take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.