LexinFintech: An Undervalued Stock with Growth Concerns and Credit Discipline Issues.

LexinFintech Holdings appears undervalued with a competitive topline, but a deeper analysis reveals growth gaps and concerns about credit discipline. The stock has a decent yield, but investors should be cautious and perform a thorough evaluation before making a decision.

LexinFintech Holdings (LX) recently reported its second quarter (Q2) 2025 earnings, showcasing a robust performance with net income rising to CNY 511.4 million and a dividend of US$0.097 per share [1]. The company's net income more than doubled year-on-year for both the latest quarter and the first half of 2025, despite a slight decrease in total revenue. This strong earnings growth has led to an increase in the dividend payout ratio from 25% to 30%, reflecting management's commitment to shareholder returns [2].

The company's Q2 earnings were driven by several key factors. Revenue grew 16% quarter-over-quarter (QoQ) to RMB 3.6 billion, with net profit increasing 19% QoQ to RMB 511 million. This growth was fueled by sustained improvement in asset quality, resilient business ecosystem expansion, and strategic product and service enhancements [2]. The e-commerce gross merchandise value (GMV) rose 2.4% QoQ to RMB 52.9 billion, while gross profit surged 71% QoQ to RMB 97 million, indicating the success of ecosystem integration and diversified offerings [2].

LexinFintech's risk management strategies also demonstrated significant improvements. The Day 1 delinquency ratio decreased by 2%, and the 90-day delinquency ratio decreased by 6% QoQ, attributed to enhanced predictive models and proactive risk strategies [2]. These improvements suggest a more disciplined approach to credit management, which is crucial for maintaining the company's financial health.

However, despite the positive earnings report, there are several factors investors should consider. The company's revenue growth has been modest, with a slight decrease in total revenue compared to the previous quarter. Additionally, the company's credit discipline remains a concern, as evidenced by the high delinquency ratios [2]. While the company has taken steps to improve its risk management strategies, the long-term sustainability of these improvements is uncertain.

Moreover, the company's stock appears undervalued based on its competitive topline, but a deeper analysis reveals growth gaps and concerns about credit discipline. The stock has a decent yield, but investors should be cautious and perform a thorough evaluation before making a decision.

In conclusion, LexinFintech Holdings' Q2 earnings report demonstrates strong earnings growth and improved risk management strategies. However, investors should be cautious and consider the company's growth gaps and concerns about credit discipline before making an investment decision.

References:
[1] https://simplywall.st/stocks/us/diversified-financials/nasdaq-lx/lexinfintech-holdings/news/why-lexinfintech-holdings-lx-is-up-104-after-doubling-q2-pro
[2] https://www.ainvest.com/news/lexinfintech-q2-2025-navigating-contradictions-regulation-shareholder-returns-ai-integration-2508/