This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

China Digital Trades at Discount

BEIJING ( TheStreet) -- Every so often I see individual stocks whose valuations simply do not make sense. Most recently I came across China Digital Communications (CMTP), which is based in Shenzhen, China.

To gain some perspective on a target valuation, I compared CMTP to China Bak Battery (CBAK - Get Report), Advanced Battery Technologies (ABAT) and to Hong Kong Highpower Technology (HPJ - Get Report).

And to make sure I wasn't missing anything important on CMTP, I went to Shenzhen to meet with company management and tour their factory.

Battery shells and caps production line

My conclusion from all of this is that China Digital's valuation should fall roughly in the middle between CBAK and ABAT, which would place it on a P/E multiple similar to that of HPJ. These are three very solid data points that all point in the same direction. The fact that it is still trading at a significant discount creates a very strong buying opportunity.

For a valuation comparison, CBAK, also based in Shenzen, is currently trading at around $3 per share, has a $170 million market cap, and currently has gross margins of around 11% despite the fact it is unprofitable. On the balance sheet, CBAK has over $150 million of debt due within 12 months and only $30 million of cash. CBAK has $40 million of long-term debt. On the expansion side, CBAK has recently announced it is building a factory in India.

ABAT is currently trading at about $4 with a market cap of $240 million. ABAT is profitable and has high gross margins of 40% to 50%. On the balance sheet, ABAT is very strong, having raised significant equity financing over the past year at stock prices in the $4-$5 range.
1 of 5

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
ABAT $0.20 0.00%
CBAK $2.63 0.00%
HPJ $3.17 0.00%
AAPL $121.30 0.00%
FB $94.01 0.00%

Markets

Chart of I:DJI
DOW 17,689.86 -56.12 -0.32%
S&P 500 2,103.84 -4.79 -0.23%
NASDAQ 5,128.2810 -0.5040 -0.01%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs