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Looking for undervalued stocks? Value investors look for opportunities to buy stocks that are trading at significant discounts to their fair value, with the assumption that they’ll move up to their fair value in the near future. One proxy for fair value is analyst target price.

We ran a screen on Chinese companies traded on U.S. exchanges for those trading at steep discounts to their analyst target prices, which may indicate that they are undervalued.

But because target prices are notoriously inflated, we only used the most pessimistic (the lowest) target prices, and for stocks with sufficient analyst coverage we only screened for stocks with five or more analyst ratings.

Interactive Chart: Press Play to compare changes in analyst ratings over the last two years for the top six stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.‬

We also created a price-weighted index of the stocks mentioned below and monitored the performance of the list relative to the S&P 500 index over the last month. To access a complete analysis of this list's recent performance, click here.

Click to enlarge

Do you think these companies should be trading higher? Use this list as a starting point for your own analysis.

List sorted by potential upside implied by target price.

1. Changyou.com Limited (NASDAQ:CYOU): Develops and operates online games in the People's Republic of China. Market cap of $1.33B. Of the 17 analysts that have set a target price on the stock, the lowest price target stands at $29.00. This implies a current upside of 34.07% from current levels around $21.63. The stock has had a couple of great days, gaining 21.03% over the last week.

2. Home Inns & Hotels Management Inc. (NASDAQ:HMIN): Develops, leases, operates, franchises and manages a chain of economy hotels in the People's Republic of China. Market cap of $1.44B. Of the 10 analysts that have set a target price on the stock, the lowest price target stands at $40.00. This implies a current upside of 33.60% from current levels around $29.94. The stock is a short squeeze candidate, with a short float at 11.05% (equivalent to 9.64 days of average volume). The stock has had a couple of great days, gaining 10.19% over the last week.

3. Sohu.com Inc. (NASDAQ:SOHU): Engages in the brand advertising, online gaming, sponsored search and wireless businesses in China. Market cap of $1.94B. Of the 16 analysts that have set a target price on the stock, the lowest price target stands at $62.00. This implies a current upside of 29.03% from current levels around $48.05. Might be undervalued at current levels, with a PEG ratio at 0.68, and P/FCF ratio at 8.96. The stock has performed poorly over the last month, losing 16.02%.

4. Hanwha SolarOne Co., Ltd (HSOL): Provides various energy solutions including silicon ingots, wafers, monocrystalline and polycrystalline solar cells, and solar modules. Market cap of $118.37M. Of the seven analysts that have set a target price on the stock, the lowest price target stands at $1.50. This implies a current upside of 26.05% from current levels around $1.19. This is a risky stock that is significantly more volatile than the overall market (beta = 2.54). The stock has performed poorly over the last month, losing 32.86%.

5. hiSoft Technology International Ltd. (HSFT): Provides outsourced information technology (IT) and research and development services in North America, Europe and Asia. Market cap of $351.52M. Of the seven analysts that have set a target price on the stock, the lowest price target stands at $14.00. This implies a current upside of 23.67% from current levels around $11.32. The stock has lost 64.18% over the last year.

6. Perfect World Co., Ltd. (NASDAQ:PWRD): Engages in the research, development, operation and licensing of online games primarily in the People's Republic of China, the United States and the Rest of Asia. Market cap of $504.05M. Of the 15 analysts that have set a target price on the stock, the lowest price target stands at $12.00. This implies a current upside of 20.85% from current levels around $9.93. The stock has performed poorly over the last month, losing 17.03%.

7. AsiaInfo-Linkage, Inc. (NASDAQ:ASIA): Provides telecommunications software solutions and information technology (IT) products and services to telecommunications carriers and other enterprises in the People's Republic of China. Market cap of $620.12M. Of the 16 analysts that have set a target price on the stock, the lowest price target stands at $10.00. This implies a current upside of 17.10% from current levels around $8.54. The stock is a short squeeze candidate, with a short float at 20.1% (equivalent to 10.69 days of average volume). The stock has had a couple of great days, gaining 12.98% over the last week.

8. Cninsure Inc. (NASDAQ:CISG): Provides insurance brokerage and agency services and insurance claims adjusting services in the People's Republic of China. Market cap of $343.60M. Of the five analysts that have set a target price on the stock, the lowest price target stands at $7.00. This implies a current upside of 15.70% from current levels around $6.05. The stock is a short squeeze candidate, with a short float at 12.08% (equivalent to 11.98 days of average volume). The stock has performed poorly over the last month, losing 15.74%.

*Target price data sourced from Thomson/First Call (via Yahoo! Finance), all other data sourced from Finviz.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Source: 8 Chinese Stocks Deeply Undervalued From Target Price