Yiren Digital (NYSE:YRD) Net Profit Margin Decline Challenges Bullish Value Narrative

Yiren Digital (NYSE:YRD) has just reported its Q3 2025 results, posting total revenue of ¥1.6 billion and basic EPS of ¥3.65. Over recent quarters, the company has seen revenue grow from ¥1.5 billion in Q3 2024 to ¥1.6 billion most recently, while EPS moved from ¥4.06 to ¥3.65 across the same period. Margins compressed over the last year, setting the backdrop for investors to weigh the ongoing profitability story alongside the current headline numbers.

See our full analysis for Yiren Digital.

Next, we are comparing these numbers with the prevailing market narratives to see which long-held beliefs are supported and which might be due for reconsideration.

Curious how numbers become stories that shape markets? Explore Community Narratives

Profit Margins Narrow Significantly

• Net profit margin for the trailing twelve months declined to 20.2%, down sharply from last year’s 32.4%. This occurred despite trailing 12-month net income of ¥1.25 billion on ¥6.2 billion revenue.
• While the company has built a strong five-year track record of 33.5% annual earnings growth, the most recent year broke the trend. What stands out is that despite margin pressure and a negative earnings change year-on-year, Yiren Digital’s valuation looks extremely discounted. This creates tension between historical growth and recent profitability slippage.
  • Margin shrinkage challenges the high-quality growth story. However, the large discount to DCF fair value (current share price at ¥4.41 compared to DCF fair value of ¥32.45) makes it more difficult for skeptics to dismiss the value case outright.
  • The consensus narrative points out that investors may still be attracted by the company’s historic growth rates and low price, but the profit squeeze raises important questions about sustainability at this pace.
• To see how market watchers are interpreting this margin trend, analysts’ consensus view highlights both the major value gap and the risks to ongoing profitability.
  📊 Read the full Yiren Digital Consensus Narrative.

Five-Year Earnings Growth Backs Value Case

• Earnings growth has averaged 33.5% per year for the past five years, with trailing net income of ¥1.25 billion supporting Yiren Digital’s historical credibility even as the most recent year turned negative.
• The consensus narrative notes the depth and duration of these gains create a powerful counter-narrative to near-term margin pressures.
  • An exceptionally low Price-to-Earnings ratio of 2.2x (well below the US consumer finance industry’s 10.2x) means the market is pricing in little future growth, despite that five-year trajectory.
  • This deep contrast between historical performance and skeptical valuation signals why some investors may see long-term upside, even if near-term caution is warranted.

Trading at an 86% Discount to DCF Fair Value

• The current share price of ¥4.41 stands 86.4% below the estimated DCF fair value of ¥32.45, positioning Yiren Digital as potentially one of the most mispriced consumer finance stocks in its peer group.
• Consensus opinion underscores that this substantial valuation gap strongly supports the thesis that “value” is the headline story, especially with the company’s P/E ratio (2.2x) so far beneath both peer (3.5x) and industry (10.2x) averages.
  • This degree of undervaluation is what analysts reference when debating if the market response to recent margin contraction is excessive compared to long-term business strength and sustainability.
  • Bulls and value-focused investors may not fully agree on the speed of recovery, but the sharp discount keeps Yiren Digital squarely on their radar as a value play.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Yiren Digital's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Yiren Digital's margin contraction and negative earnings change this year cast doubt on its ability to sustain historical growth rates.

If you want firms consistently hitting their stride, check out stable growth stocks screener (2076 results) and target companies achieving reliable earnings expansion even when others stumble.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com