What happened
Bitauto Holdings Limited (BITA) stock climbed 67.9% in 2017, according to data from S&P Global Market Intelligence. The Chinese online auto specialist recorded strong sales growth across the stretch, solid performance for its Yixin subsidiary in the lead-up to its initial public offering (IPO), and a string of generally favorable ratings coverage from analysts.
So what
Bitauto's strong fiscal performance, promising outlook for its main business and Yixin offshoot, and a bullish market for Chinese technology stocks combined to power shares to nearly 140% gains through the first 10 months of the year. The stock hit a 52-week high in October in anticipation of Yixin's IPO.
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Shares of Bitauto sold off as Yixin's post-IPO stock performance lagged some investor expectations, but the the company still posted strong gains on the year and has big growth opportunities ahead. Bitauto retains a roughly 47% stake in Yixin, and the offshoot auto-financing business has the potential to be a major positive catalyst for the parent company's stock.
Now what
Bitauto stock is priced at roughly 19 times forward earnings and 1.7 times forward sales -- levels that still leave room for substantial capital appreciation. The company's September-ended quarter saw it post a 54% year-over-year increases for both sales and gross profit, and impressive adoption for some of its growth businesses and the fact that Chinese internet penetration still has a room for substantial expansion bode well for the business.
While growth for the company's auto advertising segment appears to be slowing down, its transactions service is still growing rapidly -- with revenue up 145.7% year over year in its most recent quarter. With big growth opportunities thanks to a leading position in its market niche and the expansion of the Chinese middle class and internet availability, Bitauto stock looks like a compelling investment opportunity at current prices.
