China Automotive Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese auto-parts supplier China Automotive Systems (Nasdaq: CAAS  ) caught a massive tailwind today, rising as much as 42% in intraday trading on heavier-than-average volume.

So what: Investors were tap-dancing like school children after China Automotive released better-than-expected preliminary results for the fourth quarter. Revenue of $101 million crushed the $90 million that analysts had expected, while income from operations more than doubled to $12.3 million. The company did not release earnings per share for the quarter because it is still working through the accounting adjustments that left its stock reeling last month.

Now what: The company said that it is making good progress on restating past financials to make the needed accounting adjustments. More importantly, management said it expects top-line growth to continue at a 20% rate in 2011. In the wild and wooly world of Chinese small caps, it seems that China Automotive may have found some solid ground -- at least for today.

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