Can E-House Keep It Up?
Sep 10th 2013 6:00PM
Updated Sep 10th 2013 6:02PM
E-House was last week's biggest winner on the New York Stock Exchange, soaring 43% on continuing momentum in China's red-hot housing market.
E-House is a provider of real estate agency and information services. There was no E-House-specific news triggering the pop, but the market's enthusiasm for Chinese real estate plays is building. SouFun shares moved 19% higher on the week, but at least there was some news there.
JPMorgan had tapped SouFun as one of its favorite Internet stocks in China a week earlier.
SouFun is an online real estate portal, and anyone who has seen the stateside real estate websites take off this year can probably appreciate a somewhat similar model gaining momentum in SouFun.
As for E-House, its shares have more than doubled since bottoming out earlier this summer. A strong catalyst for its sharp move higher came when it posted blowout quarterly results last month.
Revenue climbed 43% to $163.4 million and adjusted earnings per share nearly doubled to $0.11 a share. Wall Street was dumbfounded, holding out for just $0.06 a share on the bottom line and $135.8 million in revenue. Naturally, E-House also raised its guidance, now eyeing a 36% pop in revenue for all of 2013.
The news has been encouraging on the housing front in China. SouFun -- yes, it's a data collector, too -- announced recently that home prices in China had their sharpest rise in August since late last year. E-House -- yes, that E-House -- reported that home prices in August were 11% higher than they were in August of last year.
The love isn't universal. Guggenheim China Real Estate -- an ETF investing in Chinese housing players -- is trading lower in 2013. Chinese homebuilder Xinyuan Real Estate only rose by a modest 3% on a strong trading week for growth stocks.
The good news for investors is that it's not too late to hop on E-House's bandwagon. The stock is trading for less than 20 times this year's earnings and just 14 times next year's profit target.
That's important. I singled out the stock in last month's 5 Stocks Under $10 column when the shares crossed the $6 mark, and I don't have a problem recommending it again despite moving more than 40% higher.
Have you seen the market multiples on the faster-growing stateside housing plays? The Chinese real estate market certainly feels frothy. A bubble pop would clear investors out of E-House in a hurry. However, if China's improving economy continues to justify higher home prices, forget the homebuilders. E-House and SouFun are the places to ride this out.
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The article Can E-House Keep It Up? originally appeared on Fool.com.Longtime Fool contributor Rick Munarriz has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.
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