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TheStreet Open House

Top China Stocks: Under the Radar

BOSTON ( TheStreet) -- The People's Republic of China, despite talk of a bubble, still offers investment opportunities superior to those in many developed nations, including the U.S. Here are five U.S.-listed China small-caps with outstanding prospects and "buy" ratings.

5. China Automotive Systems (CAAS) makes power-steering systems and car components.

Numbers: Third-quarter profit more than tripled to $8.6 million, or 28 cents a share, as revenue increased 75% to $65 million. The operating margin expanded from 9.1% to 14%. The company holds $55 million of cash and $60 million of debt.

Stock: China Automotive Systems has advanced 669% in the past year, trouncing U.S. benchmarks. The stock trades at a price-to-projected-earnings ratio of 27, a 31% discount to the industry average. Its PEG ratio, a measure of value relative to growth, is low at 0.6. A PEG ratio below 1 implies cheap shares.

Catalyst: China overtook the U.S. in 2009 to become the world's largest car market. Last year, its domestic industry grew by an estimated 50%. China is spurring growth by offering consumer incentives. Domestic players enjoy preferential treatment.

Consensus: Of five analysts surveyed by Bloomberg, two recommend buying the shares and the remainder advise holding. During the past three years, the stock has gained 37% annually, on average. It ranks in the top 8% of TheStreet's coverage universe.

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