Wonder Auto Technologies, Inc. (WATG), the Chinese auto parts manufacturer, is one of those unique stocks that has both value and growth characteristics and a crazy stock chart as well. Despite the recent surge in the stock, it still trades with a PEG ratio of just 0.6.

Company Description

Wonder Auto is a Chinese-based automotive parts manufacturer that produces electrical parts, suspension products and engine accessories for the Chinese and some overseas auto markets. It is one of the largest providers of alternators and starters with over 150 models of alternators and 70 models of starters.

Revenue Jumped 28.5% in the First Quarter

On May 4, Wonder Auto reported first quarter results and continued with its string of surprises as it beat Wall Street estimates by 26.67%. Earnings per share were 19 cents compared to analysts’ estimates of 15 cents.

The company is operating on all cylinders. Revenue rose to a record $40 million from $31.1 million a year ago. The big revenue gain was due to the acquisition of Jinan Worldwide, which contributed an extra $7.3 million in the quarter.

China is still its largest market as Chinese sales revenue jumped 41.9% year over year while the organic Chinese growth was 15.4%.

Wonder Auto is in an enviable position as China’s auto market continues to grow while the rest of the world’s market is declining. The Chinese stimulus program is also pumping money into the automobile sector which will benefit Wonder Auto going forward.

Analysts Are Bullish

Given the continued strength of the company’s earnings reports, covering analysts have been raising estimates on both the second quarter and the full year. Second quarter estimates are up a penny to 19 cents in the last 2 months.

For the full year, consensus estimates jumped nearly 8% to 82 cents from 76 cents per share in the last 60 days.

The Chart is Wild

Value stocks normally have pretty dependable charts, but Wonder Auto’s is a bit more volatile as you can see below.

But the fundamentals support the recent jump in the stock.

Wonder Auto is trading at just 10.3x forward earnings. It has a price-to-book ratio of 2.05. The company has an outstanding 5-year average return on equity (ROE) of 23.51%.

Zacks Investment Research
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