A Very Impressive Performance by Vipshop Holdings (VIPS)

Investors that bought Vipshop Holdings (VIPS) one year ago have experienced some very impressive gains, even after a recent brutal decline. The stock was trading below $7 at the beginning of August 2019. By January of this year the stock was trading above $14, giving investors a gain of 100% in less than six months.

The stock fell a little from January through the end of February and hit a low of $11.53. Once again the stock rallied over 100% in the next six months with the share price jumping to $24.46 on August 18.

The stock dropped sharply on August 19 after the company missed its EPS and revenue estimates. It ended up falling 19.45%. The stock fell for a few more days and seems to have found support at the $17 area. The low on August 21 and August 24 was $17.

We see on the weekly chart that an upwardly sloped trend line connects the lows from last August and this past February. The trend line is right at the $17 area currently and seems to be acting as support at this time.

Earnings consistent

Vipshop Holdings is an online discount retailer in China. The company sells brand name clothing, shoes, and jewelry at a discount. The company has seen earnings grow by 17% per year over the last three years and the EPS was up by 17% in the most recent quarterly report. Revenue was up 3% in the most recent quarter, despite the economic slowdown created by the coronavirus. Revenue has grown by an average of 10% per year over the last three years.

Vipshop has a return on equity of 25.6% and the profit margin is 6.4%. The company also has very little long-term debt. These factors should help the company in most economic environments.

After the big drop, the stock is trading with a trailing P/E of 22.1 and a forward P/E of 12.4. Those are very modest readings for a growth stock like Vipshop.

Investors could buy Vipshop at its current level and watch to see if it can gain 100% within the next six months again. I think the better way to play the pattern is with the options that expire next February. These options will expire on February 18, 2021. The 14-strike calls are currently trading at $5.00. If the stock rallies back up to the $24.46 area, the previous high, these options will double in price.

If the stock rallies 100% like it did in the two six-month periods mentioned earlier, the stock would be in the $34 range and that would make the options worth $20 — a gain of 300%.

If the stock breaks below the trend line, I would expect it to see another level of support at the 52-week moving average. The 52-week is at $15.11 currently so I would suggest a stop just below that level in the $14.90 area.

Recommended Articles

Live Near Water? You Probably Paid Too Much for Your House. Here’s Why (Map)

Even a cynic recognizes that opportunity is a key to prudent business timing. Consider home buying. If you’re in the market for a new home, and are informed and discerning

3 Reasons to Should Avoid Life Settlement Policies

Most Americans don’t take life insurance for granted because almost one out of every two Americans don’t have it. According to the Insurance Information Institute, only about 54% of Americans

Feeling Hangry? How to Avoid Food-Related Mood Swings

Food that you eat is processed into simple sugars, free fatty acids and amino acids. The nutrients are moved into the bloodstream where they are assimilated by organs, tissues, and

How to Put Your Investments On Autopilot — and Win

Are you committed to investing a part of your monthly income towards retirement? You can insulate your financial future against unforeseen emergencies and economic risks if you use an automatic

Best Time to Sell or Buy a Home? It Depends…

When's the best time to buy or sell a home? That's a great question. A lot depends on who you are, seller or buyer. Traditionally, the best time of year

6 Sneaky Habits That May Be Causing Your Overeating

Overeating? Many people vastly underestimate how many calories they consume in a day. Even if you believe you restrict your daily calorie consumption, you may be consuming more calories than

How Shark Tank Judge Barbara Corcoran Nearly Lost $400,000 — Just by Reading an Email

According to a 2017 FBI Internet Crime Report, individuals and companies lost over $5.5 billion between 2013 through 2017 due to email phishing scams. Email phishing scams are deceptive emails

5 Reasons a Wrist Watch Can Be Worth More Than a Luxury Car — and Even Retain More Value Over Time

Placed side by side, a Rolex White Gold Presidential Oyster Perpetual wristwatch, is not much larger than a typical, multi-function digital timepiece made by Casio. Yet one costs over $7,000;

Biggest and Smallest National Gaps Between Rich and Poor (and Where America Ranks)

In the United States, the richest 1% controlled more than 40% of the wealth in 2016. The last time wealth inequality gaps were this wide was during the Great Depression.

3 Best Travel Websites That Save You Money

There’s a lot of travel sites out there and they all seem very similar. If you are planning for spring break in 2022, next year’s summer vacation or just getting

35 Healthy, Natural Foods You Should Be Eating

Did you know that the healthiest foods in the world are actually highly affordable, simple foods that can be found in any supermarket? The most healthy foods you should be

5 Ways to Boost Return in Your Investments While Actually Cutting Risk

Are you looking for ways to earn higher returns without risking it all? When it comes to investing your money today, there are plenty of options that promise attractive returns.