Why China HGS Real Estate (HGSH) Stock Is Up Today

NEW YORK (TheStreet) -- China HGS Real Estate  (HGSH) was gaining 29.6% to $9.76 Tuesday after announcing that it signed its second shanty area rebuilding project agreement with the Hantai District government of Hanzhong City.

The estimated investment in the new shanty area rebuilding project is about $750 million. The local government will coordinate with China HGS Real Estate to implement the reform plans. The company and the government will work together to manage the progress of the project.

"We are excited by signing both the Liangzhou road area and Lianhuachi shanty area rebuilding project agreements with the local government," China HGS Real Estate CEO Xiaojun Zhu said. "These two projects are not only important public welfare projects for the local community to improve housing conditions and people's livelihoods, but also promote local economic development."

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TheStreet Ratings team rates CHINA HGS REAL ESTATE INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA HGS REAL ESTATE INC (HGSH) a HOLD. The primary factors that have impacted our rating are mixed -- some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its robust revenue growth, impressive record of earnings per share growth and compelling growth in net income. However, as a counter to these strengths, we also find weaknesses including weak operating cash flow and a generally disappointing performance in the stock itself."

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

  • HGSH's very impressive revenue growth greatly exceeded the industry average of 11.9%. Since the same quarter one year prior, revenues leaped by 305.5%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • CHINA HGS REAL ESTATE INC reported significant earnings per share improvement 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 HGS REAL ESTATE INC increased its bottom line by earning $0.46 versus $0.11 in the prior year.
  • The current debt-to-equity ratio, 0.37, is low and is below the industry average, implying that there has been successful management of debt levels. Even though the company has a strong debt-to-equity ratio, the quick ratio of 0.12 is very weak and demonstrates a lack of ability to pay short-term obligations.
  • In its most recent trading session, HGSH has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. The fact that the stock is now selling for less than others in its industry in relation to its current earnings is not reason enough to justify a buy rating at this time.
  • Net operating cash flow has significantly decreased to -$11.55 million or 640.54% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
  • You can view the full analysis from the report here: HGSH Ratings Report

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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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