At Zacks we constantly stress the value of the Zacks Ranking System, and specifically the select few companies that earn the coveted Rank #1 (Strong Buy) rating. That is because only 5% of the Zacks Rank universe receives this grade, and over a 1-3 month time frame it has a demonstrable history of outperforming the markets.
While the Zacks Rank is an excellent near term indicator for identifying the best of the best companies, it also helps you stay in these top companies while they continue to appreciate in value. The example below, shows how the system identified a trending Chinese company, and how it kept the investor in the stock while it gained over 100% in just 10 months.
Example Autohome Inc. (ATHM)
Autohome Inc. (ATHM), offers an online destination for automobile consumers primarily in the People's Republic of China. The company through its Websites, autohome.com.cn and che168.com delivers content to automobile buyers and owners. It also offers advertising services; dealer subscription services; used automobile listings services; automobile dealer subscription services as well as operates automotive aftermarket services platform and real-time feedback on the service providers. Autohome Inc. is based in Beijing, China.
On March 3rd, 2017, ATHM became a Zacks Rank #1, a day after the company announced Q4 16 results where earnings and revenues were up +20.5%, and +86.3% YoY, respectively. Further, Autohome reported that they saw a +27% increase in the total number of average daily unique visitors via its mobile platforms. Management also detailed a plan to move away from being a content driven media platform to become a comprehensive automotive ecosystem. The goal was to become the market leader in all aspects of China’s online automotive market. The stock price closed at $32.92 on May 3rd.
Management’s shift to the ecosystem was seen over the next two quarters as they beat expectations in Q1 and Q2 17. The results showed double digit year over year growth in earnings, revenues, and unique visitors. These results caused the stock price to see sizable gains after each report; after the Q1 report (three months after becoming a Zacks Rank #1) the stock price closed at $41.88, a +27.2% gain. After the Q2 earnings announcement (six months after becoming a Zacks Rank #1) the stock price closed at $64.32, a +95.4% gain.
Going into the Q3 earnings report, Autohome remained a Zacks Rank #1. Then on November 7th, the company posted better than expected results; YoY earnings grew by +54.3%, and net income attributable to Autohome Inc. improved by +63.3%. Management also said unique visitors rose another +28% YoY, and that they were piloting a Used Car Platform in 85 cities throughout China.
After the Q3 earnings announcement, the stock price jumped up and continued to gain in value through the New Year. By the close of the bell on January 12th the stock was at $77.92, a +136.7% gain from when Autohome first became a Zacks Rank #1 on March 3rd.
The table below shows the price performance of ATHM (in green), and the 12 month forward looking EPS estimate (in red) from when it became a Zacks Rank #1 till the close of the bell January 12th.
Overall, by utilizing the Zacks Ranking system, you can easily identify the elite stocks which are best positioned to beat the market on a consistent basis, and how to stay in those top stocks as they continue to grow.
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Autohome Inc. (ATHM): Free Stock Analysis Report
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