China Automotive Systems (CAAS) is priced like it's going out of business tomorrow – p/e of 4, trading at 0.36x book value – but the company is.. growing?
They have more cash then debt, their electric power steering is over 40% of sales and they're landing new contracts in Brazil and Europe. Last quarter, EPS was up 78%. But they have a p/e of 4.
Make it make sense?
Honestly my only explanation is that 99% of traders see "China" in the name and back the fuck off.. Which I'd dig but CAAS is actually based in the Caymans lmao.
CAAS is dirt cheap but.. growing?
byu/GrowthIsOverrated instocks
Posted by GrowthIsOverrated
3 Comments
The real issue is most Chinese companies see GAAP and back the F off
Sales are increasing but profit margins are decreasing.
The PE has been in this “value” area for years so if people still arent buying its probably a value trap.
Your Cayman islands point is bearish. It was based in the US before but now that it’s based in the Cayman Islands US investors have less protection and CAAS can be less transparent overall.
Low multiples like this usually mean the market is discounting *something beyond the last EPS print*.
A few common explanations that fit CAAS:
**China / ADR risk premium**: Cayman domicile doesn’t eliminate PRC operating risk, governance concerns, VIE structure uncertainty, or weaker minority protections. Many investors won’t touch it regardless of valuation.
**Cycle risk**: Auto suppliers often look optically cheap near cycle highs. One strong quarter (EPS +78%) can compress P/E temporarily if margins or volumes aren’t sustainable.
**Cash quality**: “Net cash” matters less if cash is trapped onshore, tied up in working capital, or needed to support OEM programs.
**Liquidity & coverage**: Small-cap ADR, thin volume, minimal institutional ownership mispricings can persist longer than fundamentals suggest.
The real tell is customer concentration and contract structure.
How much revenue/profit comes from the top 3 customers, and are those EPS contracts long-term or volume-dependent?