Beijing-based ChinaChindata Group Holdings Limited (CD - Get Rating) provides carrier-neutral hyper-scale data center solutions in China, India, and Southeast Asia. It recently reported impressive fiscal fourth-quarter results, beating Wall Street estimates. Its revenue and EPS for the quarter came in at $122.67 million and $0.06, respectively, besting estimates by 2.9% and 200%, respectively.

However, the stock has declined 16.2% in price over the past six months to close yesterday’s trading session at $6.94. In addition, it is currently trading 60.3% below its 52-week high of $17.48, which it hit on April 6, 2021. 

Furthermore, recent supply chain issues are impacting its market demand, making its near-term prospects bleak.

Here is what could influence CD’s performance in the upcoming months:

Low Profitability

In terms of trailing-12-month ROCE, CD’s 3.19% is 56.9% lower than the 7.39% industry average. Its 1.69% trailing-12-month ROTA is 51.7% lower than the 3.50% industry average. Furthermore, the stock’s trailing-12-month levered FCF margin is negative, versus the 10.06% industry average. 

Stretched Valuation

In terms of forward non-GAAP P/E, CD’s 38.56x is 92.8% higher than the 20x industry average. And its 4.09x forward EV/S  is 24.2% higher than the 3.29x industry average. And the stock’s 3.93x forward P/S is 17.5% higher than the 3.34x industry average.

POWR Ratings Reflect Bleak Prospects

CD has an overall D rating, which equates to Sell in our POWR Ratings system. The POWR Ratings are calculated by accounting for 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. CD has a D grade for Quality, which is in sync with its lower-than-industry profitability ratios.

The stock has a C grade for Stability, which is consistent with its 2.35  beta. In addition, CD has a C grade for Value, which is in sync with its higher-than-industry valuation ratios.

CD also has a D grade for Momentum, which is consistent with its 52.8% loss over the past nine months and 58.8% decline over the past year.

CD is ranked #64 of 81 stocks in the D-rated Technology – Services industry. Click here to access CD’s ratings for Sentiment and Growth.

Bottom Line

CD could continue  retreating in the near term due to concerns over rising input costs and supply chain disruptions. Because the stock looks overvalued at its current price level, we think it is best to avoid it now.

How Does Chindata (CD) Stack Up Against its Peers?

While CD has an overall POWR Rating of D, one might want to consider investing in the following Technology – Services stocks with an A (Strong Buy) rating: NetScout Systems, Inc. (NTCT - Get Rating), Information Services Group, Inc. (III - Get Rating), and Sanmina Corporation Inc. (SANM - Get Rating).

CD shares were trading at $6.58 per share on Tuesday morning, down $0.36 (-5.19%). Year-to-date, CD has declined -0.15%, versus a -3.60% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles. More...

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