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.

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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.

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