Taking Stock of CLPS’ Risk Factors

Hong Kong-based CLPS Inc. (CLPS) provides information technology, consulting, and solutions services primarily to the banking, insurance, and financial sectors globally.

Recently CLPS delivered double-digit revenue growth, and triple-digit earnings growth in its H2 2021 results.

Let’s have a look at CLPS’ financials as well as what has changed in its key risk factors that investors should know.

Driven by higher demand in IT consulting services, CLPS’ H2 revenue increased 44.6% year-over-year to $67.7 million.

Raymond Lin, co-founder and CEO of CLPS, said, “CLPS has been aggressive on its global expansion strategy. We gained IT services contracts in the U.S. from major players in e-commerce industry, jumpstarting our U.S. revenue during the fiscal year 2021.

“The recent establishment of CLPS Philippines enabled us to further expand our footprint in the international market. Furthermore, we underwent corporate restructuring in order to increase our business efficiency.”

The increase in revenue, coupled with operational efficiency, helped CLPS improve its operating income by 418% to $3.4 million. Consequently, diluted earnings per share of the company improved to $0.10 from $0.04 a year ago. (See Insiders’ Hot Stocks on TipRanks)

Looking ahead to fiscal 2022, CLPS anticipates sales growth to be in the range of 30% to 35%, and bottom-line growth to be in the range of 32% to 37%.

Risk Factors

According to the Tipranks’ Risk Factors tool, CLPS’ primary risk category is Finance & Corporate, contributing 31% of the total 71 risks identified.

In the recent H2 report, the company added one key risk factor under the Legal & Regulatory risk category.

CLPS highlighted that the interpretation and implementation of Cyber Security law in China, and its probable impact on the company’s operations, pose significant uncertainties.

Under this law, network operators have to set up internal security management systems that meet the requirements of a classified protection system for cyber security.

Additionally, it also imposes vague but broad obligations to provide technical support and assistance to the public and state security authorities in connection with criminal investigations, or for reasons associated with national security.

Under this law, if CLPS is identified as an operator of “critical information infrastructure” then it may incur significant costs or be required to change its business practices in a way that could be adverse to its business.

Compared to a sector average Legal & Regulatory risk factor of 21%, CLPS’ is at 25%.