Why China Automotive Systems (CAAS) Might be Well Poised for a Surge
China Automotive Systems (CAAS) could be a solid addition to your portfolio given a notable revision in the company's earnings estimates. While the stock has been gaining lately, the trend might continue since its earnings outlook is still improving.
The rising trend in estimate revisions, which is a result of growing analyst optimism on the earnings prospects of this auto parts supplier, should get reflected in its stock price. After all, empirical research shows a strong correlation between trends in earnings estimate revisions and near-term stock price movements. This insight is at the core of our stock rating tool -- the Zacks Rank.
The five-grade Zacks Rank system, which ranges from a Zacks Rank #1 (Strong Buy) to a Zacks Rank #5 (Strong Sell), has an impressive externally-audited track record of outperformance, with Zacks #1 Ranked stocks generating an average annual return of +25% since 2008.
Consensus earnings estimates for the next quarter and full year have moved considerably higher for China Automotive Systems, as there has been strong agreement among the covering analysts in raising estimates.
The chart below shows the evolution of forward 12-month Zacks Consensus EPS estimate:
12 Month EPS
Current-Quarter Estimate Revisions
The company is expected to earn $0.04 per share for the current quarter, which represents a year-over-year change of +140%.
The Zacks Consensus Estimate for China Automotive Systems has increased 33.33% over the last 30 days, as one estimate has gone higher compared to no negative revisions.
Current-Year Estimate Revisions
For the full year, the earnings estimate of $0.30 per share represents a change of +275% from the year-ago number.
The revisions trend for the current year also appears quite promising for China Automotive Systems, with one estimate moving higher over the past month compared to no negative revisions. The consensus estimate has also received a boost over this time frame, increasing 87.5%.
Favorable Zacks Rank
Thanks to promising estimate revisions, China Automotive Systems currently carries a Zacks Rank #1 (Strong Buy). The Zacks Rank is a tried-and-tested rating tool that helps investors effectively harness the power of earnings estimate revisions and make the right investment decision. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Our research shows that stocks with Zacks Rank #1 (Strong Buy) and 2 (Buy) significantly outperform the S&P 500.
Investors have been betting on China Automotive Systems because of its solid estimate revisions, as evident from the stock's 95.4% gain over the past four weeks. As its earnings growth prospects might push the stock higher, you may consider adding it to your portfolio right away.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.