Chinese Insurer CNinsure Caps off Fantastic Week

Jacob Harper |

Despite correcting slightly in early Friday trading action, shares of Chinese insurance company CNinsure (CISG) maintained most of the gains experienced in the wake of a major earnings victory two days before.

CNinsure has been on a tear in 2014, ratcheting 55.3 percent in gains since the start of the year. This week alone saw shares gain some 35 percent, spurred by a reported increase in earnings and revenue.

Sales were a strong point, with the company notching a 15.6 percent year-over-year increase in that metric. However, the real sticking point for investors was the increase in profits, which were up 60 percent from the same period a year prior, at $0.08 cents a share. While that missed Zacks estimates by two cents, they were still strong enough to energize investors.

CEO Chunlin Wang was optimistic about the company’s near-term future, saying "In 2014, we will continue our commitment to introducing CNpad to a broader user base internally and externally, driving cross-selling and offering high value products and services to our clients. We believe these growth initiatives will pay dividends and lead the company to strong and sustained profitable growth." 

For a small-cap financial play, CNinsure sports impressive fundamentals, which have possibly contributed to the company maintaining its high valuation even after such a quick, sharp uptick. CNinsure’s price-to-book and price-to-cash are both near 1, and its quick and current ratios are a healthy 11.50. Only one firm covers CNinsure: Morgan Stanley (MS) . Morgan currently rates CNinsure as a “buy.” However, from a technical perspective, the stock has possibly entered overbought territory and is a candidate for a pullback, with an RSI nearing 90 at the end of the week.

After seeing its shares touch $30 a share in late 2010, CNinsure experienced a major downslide on disappointing sales, and its stock had languished until March. CNisnure’s March run-up just prior to the report continued after sales and earnings delivered.

CNisnure incorporated in 2007 and provides property and casualty insurance to a predominantly Chinese customer base.  The insurer operates 480 outlets in 27 provinces.

Near the end of Mar. 14 trading, CNinsure was at $8.96 a share.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Companies

Symbol Name Price Change % Volume
MS Morgan Stanley 41.83 -0.33 -0.78 11,288,363
CISG CNinsure Inc. 9.03 -0.01 -0.11 137,196
ASGLY Asahi Glass Co. Ltd. ADR 6.48 0.04 0.62 2,429

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