AsiaInfo Holdings, Inc (ASIA) is showing excellent growth rates as the company continues to expand its business. Estimate have been up consistently for the past few years and show no signs of slowing.
Company Description
AsiaInfo predominantly operates in the telecom software and IT security products arena in China. However, through a recent acquisition the company has taken its first step into the cable industry as well.
Potential Surprise
AsiaInfo is set to report quarterly results on May 3 and given the Zacks #1 Rank, it has a good probability to surprise. Estimates jumped after the last quarterly report.
The Zacks Consensus Estimate for the coming quarter rose 5 cents to 24 cents per share. AsiaInfo earned just 14 cents in the same period last year.
Excellent Growth Rates
AsiaInfo analysts also raised full year estimates for this year and the next. The Zacks Consensus Estimate for 2010 is now $1.19, up 7 cents in the past few months and represents a growth rate of 42%.
Forecasts for next year are up 25 cents on average, to $1.55, which is another 31 percentage points of growth.
Expanding Business
On Apr 5 AsiaInfo took an 80% stake in Hangzhou Zhongbo Software Technology, which provides similar services at AsiaInfo, but in the cable industry.
There is plenty of opportunity in the Chinese cable industry right now. With over 2,000 operators, we will likely see a flurry of M&A activity, much like we saw domestically decades ago.
Additionally, AsiaInfo is in a great position to take advantage of China’s rapidly growing infrastructure.
Valuation and Fundamentals
While the P/E multiples look a bit steep, at 25 times forward earnings, but the PEG ratio is 1.0. That 1.0 mark shows that the projected growth rates are coming at a fair price.
AsiaInfo’s profit margin is at just over 14%, which is more than double the industry average. The Return on equity is just under 16%, more than 3 times the norm for its peers.
The Chart
While Chinese stocks have been quite volatile lately, the estimates for ASIA continue to rise consistently. Each colored line below represents the Zacks Consensus Estimate for a particular year.
Zacks Growth Trader service Zacks Investment Research
