Is it Time to Buy the Dip in ATHM After Major Overcorrection?

Autohome stock is down approximately 62% in 2021

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Autohome Inc (NYSE:ATHM) is a Chinese company that operates an internet platform for automobile consumers. ATHM is engaged in the provision of online advertising and dealer subscription services. Through its websites, the company delivers content to automobile buyers and owners. Autohome provides professionally produced and user-generated content, an automobile library, and extensive automobile listing information to automobile consumers, covering the entire car purchase and ownership cycle. ATHM also offers sales leads, data analysis, and marketing services to assist automakers and dealers, as well as other value-added services, including auto financing, auto insurance, used car transactions, and aftermarket services.

ATHM is scheduled to release its second quarter of fiscal 2021 financial results before U.S. markets open on Wednesday, August 25. So far, Autohome has outperformed earnings expectations on all four of its most recently released quarterly earnings reports. For Q2 of 2020, ATHM beat analyst estimates by a margin of $0.04, reporting an EPS of $1.10. For Q3 of 2020, Autohome's EPS increased to $1.16, beating expectations by a margin of $0.14. For Q4 of 2020, ATHM posted another increase in earnings, rising to $1.51 per share and beating estimates by a margin of $0.03. For Q1 of 2021, Autohome reported an EPS of $0.93 and beat expectations by a margin of $0.01. Analysts are expecting ATHM's EPS to pop up to $5.96 for its upcoming earnings report, marking a massive increase in quarterly earnings.

Autohome stock has decreased approximately 62% in price year-to-date, and is down 74% since its all-time high of $147.67, reached in January. The stock has managed to put roughly 4% between its current levels and its four-year low of $35.65 this week. Moreover, Autohome offers a forward dividend of $0.87 and a dividend yield 2.30%.

athm chart aug 19

Overall, AutoHome stock has strong potential as both a value and a growth play. ATHM has reached a very intriguing valuation, after losing about three-fourths of its value in the span of roughly six months. Now Autohome stock trades at an extremely attractive price-earnings ratio of 8.52, with a solid forward price-earnings ratio of 9.51 as well. In addition, ATHM has maintained consistent top- and bottom-line growth in recent years, increasing revenues and net income by 44% and 73%, respectively, since fiscal 2017. In general, Autohome stock has overcorrected its previously high valuation, providing investors with an excellent potential buying opportunity.

 

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