In light of Chinese New Year, five Peter Lynch growth stocks trading on Chinese stock exchanges with high profitability ranks are Guangdong Provincial Expressway Development Co. Ltd. (SZSE:000429, Financial), Jiangsu Expressway Co. Ltd. (SHSE:600377, Financial), Dongguan Development Holdings Co. Ltd. (SZSE:000828, Financial), Beijing Capital International Airport Co. Ltd. (HKSE:00694, Financial) and Dongjiang Environmental Co. Ltd. (HKSE:00895) according to the All-in-One Screener, a major Premium feature of GuruFocus.
Chinese New Year background and investing implications
According to ChineseNewYear.net, a website dedicated to the Chinese holiday, Chinese New Year is a time where the Chinese reunite with their family, leading to a Spring Migration that can crowd airports as well as train and metro stations. Common traditions during Chinese New Year include fireworks, red lanterns and red envelopes.
As such, investors might find good opportunities in Peter Lynch growth companies that trade in Chinese markets despite fears of the coronavirus outbreak worsening. The Screener lists several criteria, which include a price-earnings ratio less than 14, a two-star business predictability rank and a 10-year revenue growth rate of at least 6%.
Screener gets new “rank by” feature
The Screener received around New Year’s Day a new feature where users can take the Screener results and rank them based on a combination of fields. Figure 1 illustrates a sample screen shot where the Screener results compute and display the overall rank based on a combination of three fields: the five-year gross margin growth rate, operating margin and the five-year operating margin growth rate. Berkshire Hathaway Inc. (BRK.A)(BRK.B) co-managers Warren Buffett (Trades, Portfolio) and Charlie Munger (Trades, Portfolio) seek stocks with high and expanding profit margins as part of their four-criterion approach to investing.
Figure 1
The Screener highlights the top three stocks with green flags for emphasis.
Guangdong Provincial Expressway
Guangdong Provincial Expressway, the top-ranked stock according to the Screener, develops and operates a wide range of expressways in South China. The group generates revenue primarily from the collection of toll fees from highways and bridges.
GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include a 3.5-star business predictability rank and an operating margin of 50.87% that is near a 10-year high and outperforms over 98% of global competitors.
Guangdong Provincial Expressway’s valuation ranks 5 out of 10: Even though the company’s share price is near a 10-year high, the price-book ratio is near a three-year low despite underperforming 71% of global construction companies.
Jiangsu Expressway
Ranked number two on the Screener results, Jiangsu Expressway operates a network of toll roads within East China, including the Shanghai-Nanjing Expressway. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include a four-star business predictability rank, a return on assets that outperforms 85.21% of global competitors and an operating margin near a 10-year high of 51.72% and outperforms 98.46% of global infrastructure companies.
Dongguan Development
Dongguan Development operates highways around the Guangdong province. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and an operating margin near a 10-year high of 61.68%, outperforming over 99% of global competitors.
Dongguan Development’s valuation ranks 9 out of 10 on the heels of price-earnings ratios near a 10-year low of 6.88% and outperforming 79.14% of global infrastructure companies. Other positive investing signs include price-book and price-sales ratios near one-year lows.
Beijing Capital Airport
Hong Kong-listed Beijing Capital Airport owns and operates the Chinese airport of the same name, comprising of three runways and three terminals. GuruFocus ranks the company’s profitability 8 out of 10 on several positive investing signs, which include a high Piotroski F-score of 8 and an operating margin that outperforms 92.35% of global airports and air services competitors.
Beijing Capital Airport’s valuation ranks 9 out of 10 on the heels of price-earnings and EV-to-Ebit ratios outperforming 73.21% and 82.02% of global competitors.
Dongjiang Environmental
Dongjiang Environmental operates seven waste management business segments, including waste recycling, industrial and municipal waste treatment. GuruFocus ranks the company’s profitability 9 out of 10 on several positive investing signs, which include a five-star business predictability rank and operating margins that are near a 10-year a high and outperform 87.71% of global competitors.
Dongjiang’s valuation ranks 10 out of 10 on the heels of price-earnings, price-book and price-sales ratios near 10-year lows, with price-earnings outperforming 72.41% of global competitors.
Disclosure: No positions.
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