Most investors oftentimes limit themselves too much when deciding what stocks to invest in next. Most times, they primarily look for American-based companies with safe, secure upsides. More specifically, investors look for reliable companies that have earnings growth potential at a fair valuation. After all, this is the crux of what many consider a good investment. But, being blind to international companies with these exact same amazing features can result in many missing out on plenty of great, undervalued opportunities.
When looking at foreign companies, one of the biggest problems investors have with Chinese companies is they view them as too volatile and risky. But, as open-minded investors, we should all remember that a secure business model, no matter where the company is from, will greatly decrease any sort of risk and skew returns to the upside. With the growth potential that many Chinese-based companies have, they are definitely worth considering. Here are our top three Chinese stocks to buy now for June 2024.
Vipshop Holdings (VIPS)
Vipshop Holdings (NYSE:VIPS) is an online platform in China that operates the VIPS online retail website. Its unique flash sales business model has allowed it to offer heavy discounts on branded products and has been a leading factor behind its 110% 5-year growth. Currently, analysts project a one-year price target for VIPS of up to $24, a roughly 60% upside!
Given that China holds the world’s largest e-commerce market in the world, VIPS’s competitive moat as a unique discounter has allowed it to penetrate the growing middle class with affordable luxury goods. Top line-wise, this model has allowed VIPS to maintain an amazing inventory turnover ratio of ~15x, more than double the average ratio in the e-commerce industry.
Looking at its financials, we see VIPS in a relatively healthy financial position. In Q1 2024, VIPS saw gross profit hit roughly 11%, and net income rise by about 25%. But, beyond these financials, VIPS’s most attractive metric is its valuation. Currently, the VIPS P/E ratio of 6.03x sits over 50% under its sector median! For any investor looking to get some strong international retail exposure this June, look no further than Vipshop!
Trip.com (TCOM)
Trip.com (NASDAQ:TCOM) is a Shanghainese-based travel service company whose revenue segments have recently surpassed pre-pandemic levels. Wallstreet analysts are currently eyeing this company with a one-year price target range between an average of $66.63 and a high of $86.99.
TCOM’s growth trajectory is looking as strong as ever, and this is largely due to macroeconomic tailwinds from the government. For example, the recent simplification of the Visa application process, as well as increased facilitation of foreign credit card payments, have all been leading contributors toward increasing inbound tourism. Additionally, management has largely cited their usage of AI assistant TripGenie, as a revolutionizing model that has helped drive down operational costs and provide even more seamless travel experiences.
This quarter, TCOM displayed extraordinary performance, with revenue growing 122% YOY and an EBITDA margin hitting just over 30%! Interestingly enough, when looking at its PEG ratio to account for such growth, TCOM’s valuation still sits roughly 50% cheaper than its competitors! Investors looking to increase their Chinese exposure should definitely add Trip.com to their radar.
Nio (NIO)
NIO (NYSE:NIO) is an electric vehicle manufacturer that is well-known for its innovative battery technology. The stock is down over 50% in the past year which creates plenty of upside. In fact, analysts have an average one-year price target of around $6.19, which would be an upside of almost 40% from the current price.
In the month of May, Nio delivered over 20,000 vehicles. To put this into context, this was a growth of over 233.8% year-over-year. The company is also expanding partnerships for its battery-swapping technology. As such, the company is pushing forward through some struggles its had and increasing big drivers of its bottom line.
Looking at the stock’s valuation, the forward EV/Sales ratio currently sits at 0.95x, which is over 20% lower than the sector median. With the valuation being so low, the company is offering minimal risk to investors buying in at the current price. And with plenty of growth potential, this stock should be high on investors’ buying lists.
On the date of publication, Ian Hartana and Vayun Chugh did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
