Can Vipshop Keep Going After Last Week's 11% Pop?

By Markets

Image source: Vipshop.

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One of the market's biggest winners in the three-year span between 2012 and 2014 is showing signs of life again, as shares ofVipshop (NYSE: VIPS)soared 11.48% last week. There was no company-specific news to spur last week's buying spree, but the stock has been moving higher since the company posted blowout financial results this summer.

Chinese stocks generally moved higher on the week. A likely catalyst came when Chinese Premier Li Keqiang offered some encouraging news about the state of the economy in the world's most populous nation. He thinks the country could sustain growth at a healthy rate in the long term. He's also backing proposals to open China's economy by encouraging development.

However, Vipshop wouldn't go along for the ride if investors didn't think the former market darling was back on track. That confirmation came in August, when it posted better-than-expected results for the second quarter.

Flash sale on a flash-sale provider

The fast-growing online discounter of branded apparel clocked in with $2.02 billion in revenue for the second quarter, 49% ahead of the prior year. That may be light relative to its historical standards, but it was an acceleration from the prior quarter's 41% year-over-year gain. Analysts were holding out for only $1.9 billion in revenue. Adjusted earnings rose 31% to $0.17 a share, also well ahead of the $0.15 the Wall Street pros were targeting.

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Vipshopwas a blazing investment a few years ago, soaring 174%, 370%, and 133% in 2012, 2013, and 2014, respectively. When you double three years in a row, you typically attract investor attention, but Vipshop remained largely off the radar for stateside growth seekers skeptical of China's dot-com offerings.

The stock's three-year run concluded with a 10-for-1 stock split in late 2014, but that's when growth began to slow for both Vipshop's business and its stock. Shares of Vipshop declined 22% last year, and they were trading lower again this year before this summer's blowout quarter.

Vipshop's popularity continues to grow. The flash sale provider has 23 million active customers, 62% more than it had on its rolls a year earlier. They're not placing as many orders as they used to, and the orders are smaller -- hence the mere 49% spike in revenue -- but it's still impressive volume.

Growth might slow at this point. Vipshop's guidance last month was calling for just 37% to 43% in top-line growth for the current quarter that ends this week. However, it was targeting only 37% to 42% last time out, and the market was still treated to a 49% surge in revenue. If Vipshop is back just as investors are warming up to Chinese e-tailers, it could be the right stock at the right time.

Dangdang (NYSE: DANG) -- another online retailer that also had its share of ups and downs -- punched out last week. It was taken private after Tuesday's market close, a path that many out-of-favor Chinese growth stocks have followed in light of investor apathy. That's not Vipshop's problem these days. It may never have another three-year run the way it did between 2012 and 2014, but it's inching its way back into favor now.

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Rick Munarriz has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.