3 Undervalued Chinese Micro Caps With Impressive Profitability

by: Kapitall

Interested in gaining exposure to China? We ran a screen with that idea in mind.

We began by screening Chinese stocks trading on US exchanges for those that appear undervalued relative to earnings growth, with PEG below 1.

We then screened for those with strong profitability compared to industry peers, with higher gross, operating, and pretax margins than their industry averages by at least 5% on each margin. This indicates that these companies are taking a greater percentage of their revenues as profits, and they also have stronger control over their cost structures.

For an interactive version of this chart, click on the image below. Analyst ratings sourced from Zacks Investment Research.

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

List sorted by PEG.

1. Yongye International, Inc. (NASDAQ:YONG): Engages in the research, development, manufacture, and sale of fulvic acid based liquid and powder nutrient compounds for plants and animals, which are used in the agriculture industry in the People's Republic of China. Market cap at $180.93M, most recent closing price at $3.57. PEG at 0.21. TTM gross margin at 59.63% vs. industry average at 37.63%. TTM operating margin at 27.16% vs. industry average at 17.63%. TTM pretax margin at 29.06% vs. industry average at 16.23%.

2. Noah Holdings Limited (NYSE:NOAH): Engages in the distribution of wealth management products to the high net worth population in China. Market cap at $292.28M, most recent closing price at $5.21. PEG at 0.52. TTM gross margin at 78.25% vs. industry average at 39.48%. TTM operating margin at 28.62% vs. industry average at 23.43%. TTM pretax margin at 37.52% vs. industry average at 24.13%.

3. China Digital TV Holding Co., Ltd. (STV): Provides conditional access (CA) systems to digital television markets in the People's Republic of China. Market cap at $172.87M, most recent closing price at $2.93. PEG at 0.54. TTM gross margin at 79.09% vs. industry average at 45.32%. TTM operating margin at 43.3% vs. industry average at 29.32%. TTM pretax margin at 47.99% vs. industry average at 29.16%.

*Profitability data sourced from Fidelity, 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.