Hollysys Automation Technologies Ltd. (HOLI, Financial) blasted higher on Tuesday by more than 17% on reports that a Chinese investment firm is considering a buyout of the company. The Chinese tech stock moved up on a day when at least two other such equities dropped to new lows: Alibaba Group Holding Ltd. (BABA, Financial) and Vipshop Holdings Ltd. (VIPS, Financial). This kind of positive divergence underscores the strength in Hollysys.
Not only that, but a quick look at the basics of the company reveals how much of a value stock it remains, even at this higher price level. It continues to trade a significant discount to its book value – Hollysys can be purchased for just 89% of book.
The price-earnings ratio of 11.79 remains well below the average of the market taken as a whole. The Standard & Poor’s 500 is sitting with a multiple of 24.31 and a Shiller price-earnings ratio of 34.89. If you’re the sort of investor who seeks out value and appreciates a good bargain, then Hollysys may be right for you.
But wait, there’s more.
Earnings this year are up by 11.20%. The past five-year growth rate is -5.80%. Wall Street expects earnings to grow well next year and the forecast for the next five years is positive as well.
Hollysys has no long-term debt and a positive current ratio that comes in at 3.30.
The company pays a dividend of 32 cents per share for an annualized yield of 2.03%.
The GuruFocus financials summary of Hollysys finds seven good signs and one severe warning sign.
According to Yahoo Finance, it’s a state-owned company called Beijing Infrastructure Investment Co. that is said to be interested in taking Hollysys private. The source for this information “asked not to be identified.” The story goes on to say that “other suitors could emerge,” which makes sense if you study the basic financials for the company.
I first wrote about the potential value of Hollysys Automation several weeks ago. It looks as if someone in Beijing has also been paying attention to the company.
