Why Noah Holdings Limited (ADR) Shares Soured

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 Noah Holdings , an asset management advisory firm to wealthy individuals in China, dipped as much as 15% after reporting its third-quarter earnings results after the bell last night.

So what: For the quarter, Noah reported a 61% increase in net revenue to $41.5 million as net income soared 85% to $14 million, or an adjusted $0.27 per share. The number of registered clients increased 32% to more than 50,000 people as the aggregate value of assets under management improved 61% to approximately $2 billion. Wall Street, on the other hand, had been expecting EPS of $0.28, and that appears to be the reason for today's tumble.

Now what: Noah's shares have essentially quadrupled from their 52-week lows, so I'd like to think that a robust quarter beat was already priced into its shares. Even with impressive revenue and profit growth, Noah's needed to crush the Street's estimates if it hoped to keep its lofty valuation -- and that didn't happen. While Noah could easily rebound moving forward, I remain skeptical about placing too much of a premium on China-based companies given how erratic GDP growth has been of late. With that in mind, I'll personally be sticking to the sidelines for now.

Here's an opportunity you won't want to miss
The market stormed out to huge gains across 2013, leaving investors on the sidelines burned. However, opportunistic investors can still find huge winners. The Motley Fool's chief investment officer has just hand-picked one such opportunity in our new report: "The Motley Fool's Top Stock for 2014." To find out which stock it is and read our in-depth report, simply click here. It's free!

The article Why Noah Holdings Limited (ADR) Shares Soured originally appeared on Fool.com.

Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.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.

Read Full Story