Why Xinyuan Real Estate Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Xinyuan Real Estate , a residential real estate developer in China, roared higher by as much as 11% after reporting its fourth-quarter earnings results and raising its quarterly dividend.

So what: For the quarter, Xinyuan's revenue jumped a whopping 31.7% to $261.3 million as contract sales increased a more modest 9.5%. Diluted earnings rose to $0.47 from $0.38 in the year-ago period, and $0.44 in the sequential third-quarter. Xinyuan also announced a boost to its dividend of 25% from $0.04 to $0.05 per share, payable tomorrow. With few, if any, analysts following this small-cap builder, investors were free to judge the results on their merits alone, rather than against estimates, and investors appear to like what they've seen.


Now what: What's truly astounding is that Xinyuan is predicting net income for 2013 in a range of $90 million to $100 million, or $1.25-$1.39. That's a forward P/E, based on its current price, of less than four! This shows that investors are giving Xinyuan's results much less credence following the numerous Chinese small caps that turned out to be fraudulent companies in 2011/2012 and are still quite leery of Chinese small-cap stocks in general. However, the simple fact that Xinyuan is paying and boosting its dividend could be a good sign that its profits are legit and that they could continue higher. This could be a name worth watching moving forward.

Craving more input? Start by adding Xinyuan Real Estate to your free and personalized Watchlist so you can keep up on the latest news with the company.

The best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article Why Xinyuan Real Estate Shares Jumped originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.


Increase your money and finance knowledge from home

Investing in Emerging Markets

Learn to invest in a globalized world.

View Course »

Introduction to Preferred Shares

Learn the difference between preferred and common shares.

View Course »

Add a Comment

*0 / 3000 Character Maximum