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Why China XD Plastics Co. Ltd. Shares Jumped

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 China XD Plastics  (NASDAQ: CXDC  ) were up as much as 10% today after the company turned in a strong first-quarter earnings report this morning.

So what: The auto-parts supplier said earnings per share increased nearly 50% to $0.34, while sales improved 30.8% to $223.6 million. The increase in sales came in part from a 14% uptick in selling prices as demand for automotive polymer composite materials rose. Earnings estimates were unavailable, but this report certainly makes the stock (with a P/E of about 4) look cheap on an earnings basis. 

Now what: CEO Jie Han said the quarter reflected China XD's "strong execution of solidifying our leading position in the marketplace," and noted that higher prices helped drive a 380-basis-point jump in gross margin to 20.9%. The company also maintained its guidance for the year, calling for revenue of $950 million to $1.05 billion and earnings per share of $1.54 to $1.85. With solid financial results across the board, two Morgan Stanley affiliates on its board (which adds credibility to the stock), and a dirt cheap valuation, shares could easily move higher from here. 

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Jeremy Bowman

Fool since 2011. I write about consumer goods, the big picture, and whatever else piques my interest. Follow me on Twitter to see my latest articles, and for commentary on hot topics in retail and the broad market.

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Related Tickers

9/2/2015 3:59 PM
CXDC $5.94 Up +0.12 +2.06%
China XD Plastics CAPS Rating: *