Up Fintech vs. FinVolution Group: Which Stock is a Better Buy?

Headquartered in Shanghai, China, FinVolution Group (FINV) operates an online consumer finance platform. The company’s products and services include loan services and investment services. In comparison, Beijing, China-based UP Fintech Holding Limited (TIGR) provides online brokerage services focusing on Chinese investors. Its brokerage platform allows investors to trade stocks, options, warrants, and other financial instruments. It also provides asset management, trade execution, ESOP management, asset custody, margin financing, and other services.

Thanks to the remote lifestyles, the fintech industry has witnessed steady growth since the onset of the COVID-19 pandemic. Fintech companies are gaining prominence worldwide due to the convenience they offer in administering financial transactions. Innovations in the fintech space have forced traditional banks and financial institutions to make technology investments to stay relevant and competitive. Furthermore, relatively newer trends, such as buy-now-pay-later (BNPL), neo banks, and platform-as-a-service (PaaS) are expected to fuel the industry’s growth in the coming years. The global fintech market is expected to grow at a 25.1% CAGR to $324 billion by 2026.

FINV stock has declined 19.2% in price year-to-date, while TIGR has gained 13.4%. But TIGR is the clear winner with 12% gains over the past three months versus FINV’s 18.7% decline.

Which is a better stock to buy now? Let’s find out.

Latest Developments

On Jan.19, 2022, FINV announced that it had received a “low risk” Environmental, Social, and Governance (ESG) rating from Sustainalytics. The company featured among the top 10% of its industry peer group in terms of ESG performance. FINV’s Deputy Chairman and President TieZheng Li said, “We have been incorporating ESG practices into our operations for years, and the Sustainalytics ESG risk rating is a testament to our relentless commitment to the robust management of all material ESG risks and opportunities across our business.”

On Feb. 28, 2022, TIGR announced its foray into the online brokerage industry in Australia with its app-based comprehensive trading platform and competitive price strategy. TIGR launched its proprietary one-stop investing platform Tiger Trade in Australia, allowing Australian investors to access the U.S. markets to trade shares, ETFs, and options with free real-time quotes, in-depth market data, and vast market analytics tools.

Recent Financial Results

FINV’s net revenue increased 32.1% year-over-year to RMB2.44 billion ($0.38 billion) for the fourth quarter ended Dec. 31, 2021. The company’s attributable net profit increased 32.7% year-over-year to RMB655.85 million ($103.09 million). Also, its EPS came in at RMB0.44, representing a 29.4% increase year-over-year.

TIGR’s total revenues increased 31.6% year-over-year to $62.19 million for the fourth quarter, ended Dec. 31, 2021. Its net revenue increased 36% year-over-year to $58.36 million. Also, its non-GAAP net income came in at $76.20K, compared to $10.26 million in  non-GAAP net income in the year-ago period.

Past and Expected Financial Performance

FINV’s revenue and total assets have grown at CAGRs of 27.1% and 11.3%, respectively, over the past three years. Analysts expect FINV’s revenue to increase 10.6% in the current year and 17.4% next year. The company’s EPS is expected to grow 5.1% in the current year and 8.3% next year. Furthermore, its EPS is expected to grow at a 0.8% rate  per annum over the next five years.

TIGR’s revenue and total assets have grown at CAGRs of 94.2% and 206.6%, respectively, over the past three years. Analysts expect the company’s revenue to increase 77.2% in the current year and 27.4% next year. TIGR’s  EPS is expected to grow 14% in the current year and 130.9% next year.

Profitability

FINV’s trailing-12-month revenue is 6.1 times TIGR’s. FINV is also more profitable, with a 26.49% net income margin compared to TIGR’s 5.97%.

Furthermore, FINV’s ROCE and ROA of 26.38% and 13.83%, respectively, are higher than TIGR’s 4.31% and 0.44%.

Valuation

In terms of forward P/S, TIGR is currently trading at 2.56x, which is 245.9% higher than FINV’s 0.74x.And TIGR’s 1.75x forward P/B ratio is 201.7% higher than FINV’s 0.58x.

So, FINV is more affordable.

POWR Ratings

FINV has an overall B rating, which equates to a Buy in our proprietary POWR Ratings system. In contrast, TIGR has an overall rating of D, which translates to Sell. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

FINV has an A grade for Value, which is consistent with its 2.76x forward non-GAAP P/E, which is 76% lower than the 11.52x industry average. However, TIGR has a C grade for Value, which is in sync with its 31.12x forward non-GAAP P/E , which is 170.1% higher than the 11.52x industry average.

FINV has a B grade for Quality. This is justified given FINV’s 0.57% trailing-12-month asset turnover ratio, which is 173.6% higher than the 0.21% industry average. In comparison, TIGR has a Quality grade of C, which is in sync with its 0.09% trailing-12-month asset turnover ratio, which is 57.4% lower than the 0.21% industry average.

Among the 51 stocks in the China industry, FINV is ranked first. However, TIGR is ranked #101  of 112 stocks in the Financial Services (Enterprise) industry.

Beyond what I have stated above, we have also rated the stocks for Growth, Momentum, Stability, and Sentiment. Click here to view all the FINV ratings. Also, get all the TIGR ratings here.

The Winner

The global fintech industry is expected to witness solid growth as adoption rates for fintech services inch higher. While both FINV and TIGR are expected to gain, we think it is better to bet on FINV now because of its lower valuation, higher profitability, and robust financials.

Our research shows that odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. View all the other top-rated stocks in the China industry here. Also, click here to access all the top-rated stocks in the Financial Services (Enterprise) industry.

FINV shares were trading at $4.07 per share on Tuesday morning, up $0.09 (+2.26%). Year-to-date, FINV has declined -17.44%, versus a -5.89% rise in the benchmark S&P 500 index during the same period.

Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.

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