Why China XD Plastics Co. Ltd. Shares Popped

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 Co. Ltd. (NASDAQ: CXDC  ) gained as much as 17% today and finished up 5%, continuing a rally from last week following its earnings release.

So what: The auto-parts supplier hit a 52-week high again today on high-volume trading rally that looks entirely momentum-driven. Shares of China XD have now nearly doubled in the last two months, a run that began with a blowout fourth-quarter earnings report at the end of March, when revenue jumped 128% and net income more than tripled.

Now what: The positive results continued last Wednesday in its 2014 first-quarter earnings report, as China XD saw revenue improve 31% and net income jump by nearly 50% a share to $0.34. At a dirt cheap P/E of 4 and with serious momentum behind it, shares could easily move higher, but such a low valuation can call suspicion to a stock. China XD seems to be cheaply valued in part because it became listed in the U.S. through a reverse merger, a process that companies sometimes use when they cannot become listed through the usual procedure. In the past, several Chinese companies that used this process were exposed as fraudulent. A Morgan Stanley private-equity fund invested $100 million into China XD back in 2011, giving the company additional credibility, and the stock has been traded in the US for several years now without any meaningful concerns. While China XD's growth and valuation look promising, potential investors may want to do some extra due diligence on China XD due to its unusually low P/E and as the recent run-up is likely due in part to traders who are looking for a short-term profit.

Will this stock be your next multi-bagger?
Give us five minutes and we'll show how you could own the best stock for 2014. Every year, The Motley Fool's chief investment officer hand-picks one stock with amazing potential. But it's not just any run-of-the-mill company. It's a stock perfectly positioned to cash in on the upcoming year's most lucrative trends. Last year his pick skyrocketed 134%. And previous top picks have gained upwards of 908%, 1,252% and 1,303%! You don't want to miss what could be his biggest winner yet! Just click here to download your free copy of "The Motley Fool's Top Stock for 2014" today.


Read/Post Comments (0) | Recommend This Article (0)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

Be the first one to comment on this article.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2963700, ~/Articles/ArticleHandler.aspx, 9/3/2015 9:00:07 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

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.

Today's Market

updated 11 hours ago Sponsored by:
DOW 16,351.38 293.03 0.00%
S&P 500 1,948.86 35.01 0.00%
NASD 4,749.98 0.00 0.00%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/2/2015 3:59 PM
CXDC $5.94 Down +0.00 +0.00%
China XD Plastics CAPS Rating: *