China Stock Story

CAAS
 Stock
  

USD 2.94  0.03  1.01%   

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

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.
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 Sys 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. Please check the breakdown between China Automotive's total debt and its cash.

How does China utilize its cash?

To perform a cash flow analysis of China Automotive, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash China Automotive is receiving and how much cash it distributes out in a given period. The China Automotive cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.
China Automotive Net Cash Flow from Operations is relatively stable at the moment as compared to the past year. China Automotive reported last year Net Cash Flow from Operations of 28.27 Million

China Automotive Volatility Drivers

China Automotive unsystematic risk is unique to China Automotive Sys 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 Goodyear Tire Rubber. You can also mitigate this risk by investing in the auto parts 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.
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