This Day On The Street
Continue to site right-arrow
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
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

China Stocks: Price vs. Fundamentals

Stocks in this article: CWS BSPM DYP

BEIJING ( TheStreet) -- New Energy Systems (NEWN.OB) announced Friday record revenues and EPS for the quarter ended March 31. In comparison to last year, revenues increased 753% and gross profit increased by more than 800%. EPS increased by more than 300%.

How did the stock react? It fell by nearly 4% on moderate volume solely due to the overall negative sentiment in the market. Contrast this to China Wind Systems (CWS) which was lucky enough to announce very positive guidance on a strong day in the market. The stock jumped as much as 25% as investors cheered the results and the strong market further fueled the upswing.

Both of the stocks highlight the current fact that individual company fundamentals are now taking a back seat to overall market sentiment in determining stock prices. I feel that this creates an opportunity to occasionally pick up value stocks on the cheap when they trade down for no reason other than market sentiment.

NEWN's 4% drop is a very good example. The company re-affirmed full year guidance at $1.23 earnings per share (excluding non cash charges). This puts the company on a PE of about six times guided earnings despite tremendous growth with a high degree of earnings visibility. Assuming full year EPS of $1.23 breaks down to about $0.31 per quarter. Yet NEWN's $.037 was about 20% higher than that. This over-performance is quite a notable fact given that the first quarter is typically the slowest quarter of the year in China due to two weeks of Chinese New Year holidays.

Management has a history of being conservative with projections and then over-delivering on results. They have already repeatedly and prominently communicated the $1.23 number so I am of the opinion that they are quite certain of meeting or beating it. Based on the first quarter numbers, I am starting to suspect a reasonable chance of NEWN beating this $1.23 number for the year which would place the current PE ratio somewhere in the 5-6 range. For a company with this type of growth and which has stated it needs no external funding, this is a bargain, especially compared to other battery comparables which traded in the mid-teens. The catalyst for a big move upwards will be when the stock uplists to the Nasdaq which could still take some time given that there are still some required board changes that need to happen.

1 of 4

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs