LightInTheBox Holding Co.: Buy the Dip

NYSE: LITB | LightInTheBox Holding Co. Ltd. ADR News, Ratings, and Charts

LITB – Budding Chinese e-commerce retailer LightInTheBox (LITB) has been rapidly increasing its domestic and international operations over the past year, delivering record operational performance. However, amid strained relations between China and the West, will LITB be able to retain its international market share? Read more to find out.

Chinese e-commerce company LightInTheBox Holding Co., Ltd. (LITB) has been capitalizing on growth in the global e-commerce industry over the past year. The shares of LITB have gained 280.6% over the past year, and 11.4% year-to-date. LITB has backed up its triple-digit price gains over the past year through impressive sales and bottom-line performance.

LITB’s revenues have increased 63.4% year-over-year to $398.20 million in its fiscal year ended December 31, 2020. The company reported an annual net income of $13.30 million, up 1161.4% from the same period last year.

But LITB stock dipped slightly over the past month as U.S.-China relations hung by a thread. With President Biden keeping most of the tariffs imposed by the previous administration in place, and blasting China over its alleged human rights violation, LITB ADRs have declined 12.4% over the past month. However, we think LITB’s international e-commerce operations are likely to remain on track, paving the way for sustained growth.

Here’s what we think could shape LITB’s performance in the near future:

Growing Chinese E-commerce Industry

The Chinese e-commerce industry is expected to outpace the country’s domestic brick-and-mortar retail industry this year . According to eMarketer, 52.1% of China’s retail sales is expected to be derived from the e-commerce industry, thereby leading the world in terms of domestic e-commerce market share. In comparison, ecommerce is expected to represent  only 15% of the  domestic retail industry in the United States this year.

LITB is poised to capitalize on China’s blistering e-commerce sales growth. Furthermore, the country’s largest e-commerce company, Alibaba Group Holding Limited (BABA), is under stringent federal scrutiny, with the potential imposition of a large  fine for its alleged violation of antitrust regulations. Consequently,  competitor LITB is expected to benefit from  high demand for its products and services in the event consumers switch from BABA to alternative platforms for online shopping.

LITB’s extensive overseas operations in more than  140 countries is expected to play an important role in the company’s growth as the e-commerce industry gains a foothold globally.

Robust Financials and Profitability

With a market capitalization of $316.32 million, LITB has generated $398.15 million in revenues over the past year. The company’s trailing-12-month profits stood at $13.32 million. LITB’s trailing-12-month gross profit margin of 44.24% is 33.1% higher than the industry average  33.24%. Its trailing-12-month net income margin of 3.34% is 42.3% higher than the industry average  2.35%.

Also,  LITB’s trailing-12-month ROE, ROA and ROTC of 32.83%, 8.43% and 4.5%, respectively, compare favorably with the respective industry averages.

The company maintains a strong balance sheet and liquidity position also,  with a trailing-12-month cash balance of $61.48 million and net operating cash flow of $1.88 million. Its total debt of $12.51 million accounts for 13.32% of the company’s total capital. Moreover, LITB has a covered ratio of 41.90, indicating optimal debt management.

Value Stock

In terms of trailing-12-month p/e, LITB is currently trading at 23.58x, 4.3% lower than the industry average  24.64x. The company’s trailing-12-month ev/sales ratio of 0.57 is 63.6% lower than the industry’s 1.84 average.

Also, LITB’s trailing-12-month price/sales multiple of 0.78 compares favorably with the industry average of 1.48.

POWR Ratings Reflect Promising Outlook

LITB has an overall B rating, which equates to Buy in our proprietary POWR Ratings system. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.

LITB has a B grade for Quality. This is justified, given its high profitability margins compared to industry peers.

LITB is ranked #14 of 83 stocks in the China group. In total, we rate LITB on eight different levels. One can check out additional LITB Ratings for Value, Growth, Stability, Sentiment, and Momentum here.

Click here to view the top-rated stocks in the China group.

Bottom Line

As one of the most renowned e-commerce retailers in China, LITB is expected to capitalize on domestic e-commerce sales growth to achieve  fresh highs this year. Moreover, with BABA under regulators’ scrutiny, we think LITB is well-positioned to capture higher domestic and international market share in the near term.

Click here to checkout our Retail Industry Report for 2021

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LITB shares were trading at $2.73 per share on Monday afternoon, down $0.10 (-3.53%). Year-to-date, LITB has gained 7.48%, versus a 9.07% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

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