Why China XD Plastics (CXDC) Stock Is Falling Today

NEW YORK (TheStreet) -- China XD Plastics (CXDC) was falling -25.2% to $5.72 Thursday following a report from Seeking Alpha that questions the chemical company's numbers.

China XD Plastics has much higher margins than its main competitor according to the report, though it spends far less on R&D. The report also highlights that the company reported higher revenues and net income in SEC filings than in SAIC filing from 2008 to 2010.

The report also says that China XD Plastics' CFO refused to answer any questions about the company.

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TheStreet Ratings team rates CHINA XD PLASTICS CO LTD as a Buy with a ratings score of B-. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA XD PLASTICS CO LTD (CXDC) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its robust revenue growth, solid stock price performance, impressive record of earnings per share growth, compelling growth in net income and notable return on equity. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The revenue growth came in higher than the industry average of 3.4%. Since the same quarter one year prior, revenues rose by 30.8%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • Powered by its strong earnings growth of 47.82% and other important driving factors, this stock has surged by 104.17% over the past year, outperforming the rise in the S&P 500 Index during the same period. Regarding the stock's future course, although almost any stock can fall in a broad market decline, CXDC should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • CHINA XD PLASTICS CO LTD has improved earnings per share by 47.8% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, CHINA XD PLASTICS CO LTD increased its bottom line by earning $2.07 versus $1.32 in the prior year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Auto Components industry average. The net income increased by 52.2% when compared to the same quarter one year prior, rising from $14.45 million to $22.00 million.
  • Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. When compared to other companies in the Auto Components industry and the overall market, CHINA XD PLASTICS CO LTD's return on equity exceeds that of the industry average and significantly exceeds that of the S&P 500.
  • You can view the full analysis from the report here: CXDC Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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