This series, brought to you by Yahoo! Finance, looks at which upgrades and downgrades make sense, and which ones investors should act on. Today, our headlines feature cloudy forecasts for both Sunedison Inc (NYSE:SUNE) and SunTrust Banks, Inc. (NYSE:STI). Brighter tidings await one stock, however, so let’s head (almost) all the way over toward the land of the rising sun, and find out why one analyst says…
Noah Holdings floats his boat
One of the biggest gainers this morning is the stock you’ve probably never heard of: Noah Holdings Limited (ADR) (NYSE:NOAH). A big player in a niche industry, Noah provides wealth management products to customers in China. With China being one of the fastest growing countries on the planet, it’s clearly a good place to do business.
This morning, analysts at Oppenheimer threw their support behind Noah Holdings Limited (ADR) (NYSE:NOAH), upgrading the shares to “outperform,” and assigning an $18 price target. Noah shares are responding positively to the news, up more than 15% already as of this writing. But are they worth it?
That’s hard to say. If you apply the traditional rule of thumb for valuing asset managers — 2% of the company’s $1.2 billion in assets under management — then Noah’s $823 million market cap looks clearly excessive. Then again, few American asset managers are growing at the pace Noah sets — 25% annualized profits growth estimated over the next five years.
Between that growth rate, and Noah’s 1.1% dividend yield, the stock’s 28.5 P/E ratio looks much more reasonable. I don’t know that Noah will go to $18 per share like Oppenheimer says it will, but at today’s $15 per share valuation, the stock may not be as expensive as it looks.
Moving on now to the “sunny” side of the Street, analysts are raining on the parade at Sunedison Inc (NYSE:SUNE) and SunTrust Banks, Inc. (NYSE:STI) this morning. Let’s take those one at a time, beginning with Sunedison Inc (NYSE:SUNE).
Sunedison Inc (NYSE:SUNE), the solar wafer manufacturer formerly known as MEMC, admitted to missing earnings Wednesday, reporting a $0.19 loss in Q2, $0.06 worse than analysts had expected. This morning, the shares got punished by a downgrade to hold from Ardour Capital.