This module uses fundamental data of China Automotive to approximate the value of its Beneish M Score. China Automotive M Score tells investors if the company management is likely to be manipulating earnings. The score is calculated using eight financial indicators that are adjusted by a specific multiplier. Please note, the M Score is a probabilistic model and cannot detect companies that manipulate their earnings with 100% accuracy. Check out China Automotive Piotroski F Score and China Automotive Altman Z Score analysis.
At this time, China Automotive's M Score is unavailable. The earnings manipulation may begin if China Automotive's top management creates an artificial sense of financial success, forcing the stock price to be traded at a high price-earnings multiple than it should be. In general, excessive earnings management by China Automotive executives may lead to removing some of the operating profits from subsequent periods to inflate earnings in the following periods. This way, the manipulation of China Automotive's earnings can lead to misrepresentations of actual financial condition, taking the otherwise loyal stakeholders on to the path of questionable ethical practices and plain fraud.
The cure to earnings manipulation is the transparency of financial reporting. It will typically remove the temptation of the top executives to inflate earnings (i.e., to promote the idea of 'winning at any cost'). Because a healthy internal audit department can enhance transparency, the board should promote the auditors' access to all the record-keeping systems across the enterprise. For example, if China Automotive's auditors report directly to the board (not management), the managers will be reluctant to manipulate simply due to the fear of punishment. On the other hand, the auditors will be free to investigate the ledgers properly because they know that the board has their back.
China Automotive Systems Beneish M-Score Driver Matrix
One of the toughest challenges investors face today is learning how to quickly synthesize historical financial statements and information provided by the company, SEC reporting, and various external parties in order to detect the potential manipulation of earnings. Understanding the correlation between China Automotive's different financial indicators related to revenue, expenses, operating profit, and net earnings helps investors identify and prioritize their investing strategies towards China Automotive in a much-optimized way. Analyzing correlations between earnings drivers directly associated with dollar figures is the most effective way to find China Automotive's degree of accounting gimmicks and manipulations.
M-Score is one of many grading techniques for value stocks. It was developed by Professor M. Daniel Beneish of the Kelley School of Business at Indiana University and published in 1999 under the paper titled The Detection of Earnings Manipulation. The Beneish score is a multi-factor model that utilizes financial identifiers to compile eight variables used to classify whether a company has manipulated its reported earnings. The variables are built from the officially filed financial statements to create a final score call 'M Score.' The score helps to identify companies that are likely to manipulate their profits if they show deteriorating gross margins, operating expenses, and leverage against growing revenue.
Although earnings manipulation is typically not the result of intentional misconduct by the c-level executives, it is still a widespread practice by the senior management of public companies such as China Automotive. It is usually done by a series of misrepresentations of various accounting rules and operating activities across multiple financial cycles. The best way to spot the manipulation is to examine the historical financial statement to find inconsistencies in earning reports to find trends in assets or liabilities that are not sustainable in the future.
The Macroaxis Fundamental Analysis modules help investors analyze China Automotive Systems's financials across various querterly and yearly statements, indicators and fundamental ratios. We help investors to determine the real value of China Automotive using virtually all public information available. We use both quantitative as well as qualitative analysis to arrive at the intrinsic value of China Automotive Systems based on its fundamental data. In general, a quantitative approach, as applied to this company, focuses on analyzing financial statements comparatively, whereas a qaualitative method uses data that is important to a company's growth but cannot be measured and presented in a numerical way.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards China Automotive in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, China Automotive's short interest history, or implied volatility extrapolated from China Automotive options trading.
Pair Trading with China Automotive
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if China Automotive position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in China Automotive will appreciate offsetting losses from the drop in the long position's value.
The ability to find closely correlated positions to China Automotive could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace China Automotive when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back China Automotive - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling China Automotive Systems to buy it.
The correlation of China Automotive is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as China Automotive moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if China Automotive Systems moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for China Automotive can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
When determining whether China Automotive Systems is a strong investment it is important to analyze China Automotive's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact China Automotive's future performance. For an informed investment choice regarding China Stock, refer to the following important reports:
Note that the China Automotive Systems information on this page should be used as a complementary analysis to other China Automotive's statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
Complementary Tools for China Stock analysis
When running China Automotive's price analysis, check to measure China Automotive's market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy China Automotive is operating at the current time. Most of China Automotive's value examination focuses on studying past and present price action to predict the probability of China Automotive's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move China Automotive's price. Additionally, you may evaluate how the addition of China Automotive to your portfolios can decrease your overall portfolio volatility.
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Is China Automotive's industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of China Automotive. If investors know China will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about China Automotive listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
1.582
Earnings Share
1.25
Revenue Per Share
19.094
Quarterly Revenue Growth
0.236
Return On Assets
0.0331
The market value of China Automotive Systems is measured differently than its book value, which is the value of China that is recorded on the company's balance sheet. Investors also form their own opinion of China Automotive's value that differs from its market value or its book value, called intrinsic value, which is China Automotive's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because China Automotive's market value can be influenced by many factors that don't directly affect China Automotive's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between China Automotive's value and its price as these two are different measures arrived at by different means. Investors typically determine if China Automotive is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, China Automotive's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.