Analyzing China Automotive Systems (NASDAQ:CAAS) & SORL Auto Parts (SORL)

China Automotive Systems (NASDAQ: CAAS) and SORL Auto Parts (NASDAQ:SORL) are both small-cap auto/tires/trucks companies, but which is the superior business? We will contrast the two businesses based on the strength of their earnings, risk, valuation, dividends, institutional ownership, profitabiliy and analyst recommendations.

Valuation and Earnings

This table compares China Automotive Systems and SORL Auto Parts’ revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio EBITDA Earnings Per Share Price/Earnings Ratio
China Automotive Systems $464.50 million 0.32 $37.50 million $0.71 6.70
SORL Auto Parts $292.18 million 0.45 $39.23 million $1.33 5.16

SORL Auto Parts has higher revenue, but lower earnings than China Automotive Systems. SORL Auto Parts is trading at a lower price-to-earnings ratio than China Automotive Systems, indicating that it is currently the more affordable of the two stocks.

Analyst Recommendations

This is a summary of recent ratings and target prices for China Automotive Systems and SORL Auto Parts, as provided by MarketBeat.com.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
China Automotive Systems 0 0 1 0 3.00
SORL Auto Parts 0 0 1 0 3.00

China Automotive Systems presently has a consensus price target of $7.50, indicating a potential upside of 57.68%. SORL Auto Parts has a consensus price target of $6.00, indicating a potential downside of 12.54%. Given China Automotive Systems’ higher probable upside, equities analysts plainly believe China Automotive Systems is more favorable than SORL Auto Parts.

Institutional & Insider Ownership

5.2% of China Automotive Systems shares are owned by institutional investors. Comparatively, 6.3% of SORL Auto Parts shares are owned by institutional investors. 62.2% of China Automotive Systems shares are owned by insiders. Comparatively, 58.9% of SORL Auto Parts shares are owned by insiders. Strong institutional ownership is an indication that hedge funds, large money managers and endowments believe a company is poised for long-term growth.

Profitability

This table compares China Automotive Systems and SORL Auto Parts’ net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
China Automotive Systems 4.86% 7.27% 3.57%
SORL Auto Parts 8.80% 15.84% 8.74%

Risk & Volatility

China Automotive Systems has a beta of 2.22, indicating that its share price is 122% more volatile than the S&P 500. Comparatively, SORL Auto Parts has a beta of 1.57, indicating that its share price is 57% more volatile than the S&P 500.

Summary

SORL Auto Parts beats China Automotive Systems on 7 of the 12 factors compared between the two stocks.

China Automotive Systems Company Profile

China Automotive Systems, Inc., (China Automotive) is a holding company. The Company, through its subsidiary, Great Genesis Holdings Limited (Genesis), owns interests in over eight Sino-joint ventures and over five subsidiaries in the People’s Republic of China (PRC), which manufacture power steering systems and/or related products for various segments of the automobile industry. Genesis also owns interests in a Brazil-based trading company, which engages mainly in the import and sales of automotive parts in Brazil. Henglong USA Corporation (HLUSA), which is a subsidiary of the Company, engages in marketing of automotive parts in North America, and provides after sales service and research and development support. The Company’s geographical segments include the United States, China and other foreign countries. One of its subsidiaries, Shenyang Jinbei Henglong Automotive Steering System Co., Ltd., focuses on power steering parts for light duty vehicles.

SORL Auto Parts Company Profile

SORL Auto Parts, Inc., through its interests in the Ruili Group Ruian Auto Parts Co., Ltd., a Sino-foreign joint venture (Joint Venture), develops, manufactures and distributes automotive brake systems and other safety related auto parts to automotive original equipment manufacturers (OEMs), and the related aftermarket both in China and abroad. The Company operates through two segments: Commercial Vehicle Brake Systems and Passenger Vehicle Brake Systems. The Company’s products are principally used in different types of commercial vehicles, such as trucks and buses, and include a range of products covering approximately 65 categories and over 2,000 specifications in automotive brake systems. The Company sells its products to approximately 70 vehicle manufacturers, including all of the primary truck manufacturers in China.

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