Big investment companies love consistent revenue and earnings growth, especially because this consistency allows them to project future growth with confidence. When you’re trying to predict anything about the future, confidence is a precious commodity.
Longtop Financial Technology (LFT) is a Chinese provider of software and IT solutions to the financial sector in China. The company’s products help run bank teller machines (ATMs), control customer relationship management (CRM) and let financial firms mine customer information for information that will enhance revenue and increase client satisfaction. The company also just signed an agreement with Netezza (NZ) to provide integrated data warehousing services in China.
The bottom line, though, is the bottom line, which has been growing steadily for a long time. Both revenue and earnings have each been growing at a 30% or better rate for the last 11 quarters. (OK, so Q3 2009 earnings were up only 29%. Don’t get picky!)
The company has no debt to speak of and the forward P/E of 21 seems entirely reasonable, given the growth of the Chinese financial sector.
The chart for LFT shows a stock that has been drifting slowly downward since January, but has caught an upwind since June 9 and is now trading above its 25- and 50-day moving averages on rising volume.
I had LFT in the Cabot China & Emerging Market Report portfolio in April, following a short stay on our Watch List. We sold it for a small profit in July after the stock corrected from 29 to 22. If this rally continues, it may make another trip to the Watch List. Then we’ll see.