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Why Sinovac Biotech Ltd. Shares Spiked Higher

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 Sinovac Biotech Ltd. (NASDAQ: SVA  ) , a developer of vaccines to treat hepatitis A, hepatitis B, and various strains of influenza, spiked higher by as much as 12% after the company reported second-quarter earnings results.

So what: For the quarter, Sinovac delivered a huge jump in revenue of 86.4% to $17.5 million driven by a doubling in hepatitis A vaccine sales, and a 58% increase in hepatitis B vaccine revenue. The company also managed to reverse a year-ago loss of $0.03 per share into a $0.02 per share profit. Comparatively, these results crushed the Street's lone estimate, which had called for an EPS loss of $0.02 on $11.6 million in revenue. Looking ahead, the company is expecting big things from its hand, foot, and mouth disease (HFMD) vaccine EV71, which is currently being reviewed by the China Food and Drug Administration.

Now what: I have to hand it to Sinovac; that was a really impressive quarter. I've been somewhat downbeat on Sinovac primarily due to the hype surrounding its HFMD vaccine EV71 which could fall flat on its face if the Chinese government chooses not to make a big enough purchase of the vaccine to make it profitable for Sinovac. All the while, I forgot all about the company's growing hep A and hep B vaccines. Personally, I'd like to see if Sinovac can keep its hepatitis vaccine momentum going in the upcoming quarters before jumping on board with the optimists. Waiting on the sidelines should also allow the hype around EV71 to mellow into more realistic expectations.

Sinovac shares certainly have plenty of reason to run higher today, but it's no longer a secret that the best investment strategy is to pick great companies and stick with them for the long term. The Motley Fool's free report, "3 Stocks That Will Help You Retire Rich," not only shares stocks that could help you build long-term wealth, but also winning strategies that every investor should know. Click here to grab your free copy today.

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9/27/2016 3:57 PM
SVA $5.91 Down -0.02 -0.34%
Sinovac Biotech CAPS Rating: **