Is Qudian Inc stock way too aggressive for baby boomers?
 | By Rifka Kats | Macroaxis Story |
In this story, I am going to address all latest Qudian Inc shareholders. I will look into why, despite the latest dip, the longer-term fundamental drivers of the firm are still sound. Allowing for the 30-days total investment horizon, Qudian Inc is expected to generate 4.5 times more return on investment than the market. However, the company is 4.5 times more volatile than its market benchmark. It trades about 0.12 of its potential returns per unit of risk. The market is currently generating roughly 0.11 per unit of risk. We estimate Qudian Inc as currently overvalued. The real value is approaching 1.79 per share.
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Reviewed by Gabriel Shpitalnik
The company is active under Financial Services sector as part of Credit Services industry. Qudian American reports 761.34 M of total liabilities with total debt to equity ratio (D/E) of 0.18, which may suggest the firm is not taking enough advantage from financial leverage. The entity has a current ratio of 4.37, indicating that it is in good position to pay out its debt commitments in time. We provide buy or sell recommendations to complement the recent expert consensus on Qudian American. Our dynamic recommendation engine exercises a multidimensional algorithm to analyze the firm's potential to grow using all technical and fundamental data available at the time.
Please note, it is not enough to conduct a financial or market analysis of a single entity such as Qudian. Your research has to be compared to or analyzed against Qudian's peers to derive any actionable benefits. When done correctly, Qudian's competitive analysis will give you plenty of quantitative and qualitative data to validate your investment decisions or develop an entirely new strategy toward taking a position in Qudian Inc.
Investing in Qudian, just like investing in any other equity instrument, is characterized by a strong risk-return correlation. High risks mean high returns and low risk means lower expected returns. Risk management is the act of identifying and assessing the potential risk and developing strategies to minimize these risks and earn maximum possible profits while holding Qudian along with other instruments in the same portfolio. Using conventional technical analysis and fundamental analysis to select individual securities into a portfolio complements risk management and adds value to overall investors' investing strategies.
Sophisticated investors, who have witnessed many market ups and downs, anticipate that the market will even out over time. This tendency of Qudian's price to converge to an average value over time is called mean reversion. However, historically, high market prices usually discourage investors that believe in mean reversion to invest, while low prices are viewed as an opportunity to buy.
How important is Qudian's Liquidity
Qudian financial leverage refers to using borrowed capital as a funding source to finance Qudian Inc ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Qudian financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Qudian's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Qudian's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between Qudian's total debt and its cash.
Qudian Gross Profit
Qudian Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Qudian previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Qudian Gross Profit growth over the last 10 years. Please check Qudian's gross profit and other fundamental indicators for more details.
Qudian Correlation with Peers
Investors in Qudian can reduce exposure to individual asset risk by holding a diversified portfolio of assets in addition to a long position in Qudian Inc. Diversification will allow for the same portfolio return with reduced risk. The correlation table of Qudian and its peers is a two-dimensional matrix that shows the correlation coefficient between pairs of securities Qudian is related in some way. The cells in the table are color-coded to highlight significantly positive and negative relationships. Each cell shows the correlation between one pair of equities and can be used to run pair trading strategies or create efficient portfolios with your current brokerage. Please check volatility of Qudian for more details
Is Qudian valued correctly by the market?
Qudian Inc appears to be extremely dangerous, given 1 month investment horizon. Qudian American maintains Sharpe Ratio (i.e. Efficiency) of 0.12, which implies the firm had 0.12% of return per unit of risk over the last month. Our standpoint towards forecasting the volatility of a stock is to use all available market data together with stock specific technical indicators that cannot be diversified away. By analyzing Qudian American technical indicators you can presently evaluate if the expected return of 0.99% is justified by implied risk. Please employ Qudian American risk adjusted performance of 0.1397, coefficient of variation of 1383.86, and semi deviation of 4.69 to confirm if our risk estimates are consistent with your expectations.
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