Will China Automotive (NASDAQ:CAAS) latest volatility spike continue?

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Given the investment horizon of 90 days China Automotive is expected to generate 2.84 times more return on investment than the market. However, the company is 2.84 times more volatile than its market benchmark. It trades about 0.06 of its potential returns per unit of risk. The DOW is currently generating roughly -0.08 per unit of risk. As many investors are getting excited about consumer cyclical space, it is fair to sum up China Automotive Sys. We will go over a few points China Automotive retail investors should remember regarding its volatility. China Automotive's seemingly stabilizing volatility may still impact the value of the stock as we estimate China Automotive as currently undervalued. The real value, based on our calculations, is getting close to 3.91 per share.

Published over a year ago

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Reviewed by Michael Smolkin

China Automotive Sys currently holds roughly 133.45 M in cash with 28.27 M of positive cash flow from operations. This results in cash-per-share (CPS) ratio of 4.33, which can makes it an attractive takeover target, given it will continue generating positive cash flow.

Will China Automotive (NASDAQ:CAAS) latest volatility spike continue?

Volatility is a rate at which the price of China Automotive or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of China Automotive may increase or decrease. In other words, similar to China's beta indicator, it measures the risk of China Automotive and helps estimate the fluctuations that may happen in a short period of time. So if prices of China Automotive fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility. Please read more on our technical analysis page.

How important is China Automotive's Liquidity

China Automotive financial leverage refers to using borrowed capital as a funding source to finance China Automotive Systems ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. China Automotive financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to China Automotive's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of China Automotive's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between China Automotive's total debt and its cash.

China Automotive Gross Profit

China Automotive Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing China Automotive previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show China Automotive Gross Profit growth over the last 10 years. Please check China Automotive's gross profit and other fundamental indicators for more details.

China Automotive Volatility Drivers

China Automotive unsystematic risk is unique to China Automotive Systems and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in China Automotive you can also buy Douglas Dynamics. You can also mitigate this risk by investing in the consumer discretionary sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing China Automotive important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in China Automotive income statement and balance sheet. Here are more details about China volatility.

	Total Assets	Net Debt	Common Stock	Total Liab	Capital Stock	Net Income	Total Revenue	Gross Profit	Tax Provision	Ptb Ratio	Pb Ratio	Ev To Sales	Payout Ratio	Pfcf Ratio	Pe Ratio	Current Ratio	Graham Number	Ebt Per Ebit	Quick Ratio	Cash Ratio	Debt Ratio	Market Cap
Total Assets		0.05	0.88	0.99	0.03	-0.05	0.98	0.84	0.05	-0.86	-0.86	-0.86	-0.72	0.86	0.86	0.06	0.38	0.63	0.0	0.14	0.16	0.37
Net Debt	0.05		0.12	0.03	0.17	-0.11	0.07	0.2	0.46	-0.06	-0.06	-0.06	0.13	0.06	0.06	0.23	0.05	-0.08	0.21	-0.71	0.82	0.31
Common Stock	0.88	0.12		0.85	0.1	0.16	0.86	0.81	0.02	-0.98	-0.98	-0.98	-0.85	0.98	0.98	0.26	0.47	0.72	0.28	0.11	0.25	0.48
Total Liab	0.99	0.03	0.85		0.04	-0.14	0.96	0.81	0.11	-0.84	-0.84	-0.84	-0.67	0.84	0.84	0.01	0.33	0.6	-0.06	0.12	0.12	0.35
Capital Stock	0.03	0.17	0.1	0.04		-0.38	-0.03	-0.14	0.19	0.1	0.1	0.1	0.21	-0.1	-0.1	0.64	-0.54	-0.03	0.37	-0.06	-0.17	0.29
Net Income	-0.05	-0.11	0.16	-0.14	-0.38		0.09	0.38	-0.43	-0.27	-0.27	-0.27	-0.45	0.26	0.27	0.37	0.69	0.43	0.57	0.3	0.16	0.09
Total Revenue	0.98	0.07	0.86	0.96	-0.03	0.09		0.92	0.04	-0.86	-0.86	-0.86	-0.73	0.86	0.86	0.12	0.46	0.65	0.08	0.15	0.21	0.35
Gross Profit	0.84	0.2	0.81	0.81	-0.14	0.38	0.92		0.11	-0.85	-0.85	-0.85	-0.77	0.85	0.85	0.27	0.72	0.76	0.31	0.12	0.38	0.43
Tax Provision	0.05	0.46	0.02	0.11	0.19	-0.43	0.04	0.11		0.02	0.02	0.02	0.18	-0.01	-0.02	0.06	0.02	0.06	0.04	-0.25	0.33	0.17
Ptb Ratio	-0.86	-0.06	-0.98	-0.84	0.1	-0.27	-0.86	-0.85	0.02		1.0	1.0	0.9	-1.0	-1.0	-0.17	-0.59	-0.77	-0.25	-0.17	-0.26	-0.4
Pb Ratio	-0.86	-0.06	-0.98	-0.84	0.1	-0.27	-0.86	-0.85	0.02	1.0		1.0	0.9	-1.0	-1.0	-0.17	-0.59	-0.77	-0.25	-0.17	-0.26	-0.4
Ev To Sales	-0.86	-0.06	-0.98	-0.84	0.1	-0.27	-0.86	-0.85	0.02	1.0	1.0		0.9	-1.0	-1.0	-0.17	-0.59	-0.77	-0.25	-0.17	-0.26	-0.4
Payout Ratio	-0.72	0.13	-0.85	-0.67	0.21	-0.45	-0.73	-0.77	0.18	0.9	0.9	0.9		-0.9	-0.9	-0.13	-0.69	-0.78	-0.25	-0.31	-0.17	-0.41
Pfcf Ratio	0.86	0.06	0.98	0.84	-0.1	0.26	0.86	0.85	-0.01	-1.0	-1.0	-1.0	-0.9		1.0	0.17	0.59	0.77	0.25	0.17	0.26	0.4
Pe Ratio	0.86	0.06	0.98	0.84	-0.1	0.27	0.86	0.85	-0.02	-1.0	-1.0	-1.0	-0.9	1.0		0.17	0.59	0.77	0.25	0.17	0.26	0.4
Current Ratio	0.06	0.23	0.26	0.01	0.64	0.37	0.12	0.27	0.06	-0.17	-0.17	-0.17	-0.13	0.17	0.17		0.08	0.44	0.93	0.17	0.11	0.31
Graham Number	0.38	0.05	0.47	0.33	-0.54	0.69	0.46	0.72	0.02	-0.59	-0.59	-0.59	-0.69	0.59	0.59	0.08		0.71	0.33	0.09	0.3	0.42
Ebt Per Ebit	0.63	-0.08	0.72	0.6	-0.03	0.43	0.65	0.76	0.06	-0.77	-0.77	-0.77	-0.78	0.77	0.77	0.44	0.71		0.58	0.35	0.04	0.37
Quick Ratio	0.0	0.21	0.28	-0.06	0.37	0.57	0.08	0.31	0.04	-0.25	-0.25	-0.25	-0.25	0.25	0.25	0.93	0.33	0.58		0.18	0.18	0.31
Cash Ratio	0.14	-0.71	0.11	0.12	-0.06	0.3	0.15	0.12	-0.25	-0.17	-0.17	-0.17	-0.31	0.17	0.17	0.17	0.09	0.35	0.18		-0.32	-0.38
Debt Ratio	0.16	0.82	0.25	0.12	-0.17	0.16	0.21	0.38	0.33	-0.26	-0.26	-0.26	-0.17	0.26	0.26	0.11	0.3	0.04	0.18	-0.32		0.16
Market Cap	0.37	0.31	0.48	0.35	0.29	0.09	0.35	0.43	0.17	-0.4	-0.4	-0.4	-0.41	0.4	0.4	0.31	0.42	0.37	0.31	-0.38	0.16

Click cells to compare fundamentals

Breaking down China Automotive Indicators

China Automotive Sys reported the previous year's revenue of 497.99 M. Net Income was 11.05 M with profit before overhead, payroll, taxes, and interest of 71.13 M.

Our take on China Automotive small fall

China Automotive latest semi deviation advances over 2.92. China Automotive Sys shows above-average downside volatility for the selected time horizon. We advise investors to inspect China Automotive Sys further and ensure that all market timing and asset allocation strategies are consistent with the estimation of China Automotive future alpha. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure China Automotive's stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact China Automotive's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

China Automotive Implied Volatility

China Automotive's implied volatility exposes the market's sentiment of China Automotive Sys stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if China Automotive's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that China Automotive stock will not fluctuate a lot when China Automotive's options are near their expiration.

While some firms in the auto parts industry are either recovering or due for a correction, China Automotive may not be performing as strong as the other in terms of long-term growth potentials. To conclude, as of the 23rd of May 2022, we see that China Automotive follows the market closely. The enterprise is undervalued with average probability of distress within the next 24 months. Our latest 90 days buy vs. sell advice on the enterprise is Strong Buy.

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Editorial Staff

Gabriel Shpitalnik is a Member of Macroaxis Editorial Board. Gabriel is a young entrepreneur and writes predominantly on the business, technology, and finance sector. He likes to analyze different equity instruments across a wide range of industries focusing primarily on consumer products and evolving technologies. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Gabriel Shpitalnik do not own shares of China Automotive Systems. Please refer to our Terms of Use for any information regarding our disclosure principles.

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