Why Home Inns & Hotel Management Shares Jumped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Home Inns & Hotel Management were looking inviting today, gaining as much as 12% following a strong second-quarter earnings report.

So what: Though the report was released Monday night, the stock gained through Tuesday and continued its upward march today. The Chinese hotel operator turned in a 10.5% revenue increase to $261 million, beating expectations of $248 million, while adjusted net income improved 28.8% to $22.8 million, or $2.89 per share. That topped estimates of $2.70 per share. Home Inns opened 100 hotels in the quarter, lifting its total to 1,953, and has more than 200 under construction, saying the pipeline remains strong.

Now what: In addition to the ambitious expansion plan, management noted successful cost-control and productivity initiatives. CEO David Sun also said that the long-term outlook for the industry remains strong, but he doesn't see "catalysts for dramatic improvements in macroeconomic conditions in the near term." Still, with its expansion plan, I expect profits to grow, and the stock looks like a steal trading for a forward P/E of 3 as investors often treat Chinese stocks skeptically. I'd expect shares to move higher.

Hotels aren't the only fast-growing business in China. Car sales are booming, too. In fact, China's already the world's largest auto market, and it's getting bigger. Find out what two automakers are poised to surge along with China's middle class in The Motley Fool's new special free report. If you want to be among the smart investors who get rich from this growing trend, then all you have to do is click here now.

The article Why Home Inns & Hotel Management Shares Jumped originally appeared on Fool.com.

Fool contributor Jeremy Bowman and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.