Top China ADR Portal

China ADR stock research


Warning: strtotime(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone. in /home1/chinaves/public_html/libraries/joomla/utilities/date.php on line 56

Warning: date(): It is not safe to rely on the system's timezone settings. You are *required* to use the date.timezone setting or the date_default_timezone_set() function. In case you used any of those methods and you are still getting this warning, you most likely misspelled the timezone identifier. We selected the timezone 'UTC' for now, but please set date.timezone to select your timezone. in /home1/chinaves/public_html/libraries/joomla/utilities/date.php on line 198

China Agritech - A Risk/Reward Opportunity

E-mail Print PDF

risk_1On August 17, 2009 the GeoTeam coded China Agritech (OTC:CAGC) as a GeoSpecial. The Company reported stellar 2009 second quarter earnings, exceeding analyst EPS estimates by about $0.10.  We have recoded CAGC as a GeoBargain.

2009 Second Quarter Financial results

2nd Qtr. 2009 2nd Qtr. 2008 Period Change
GAAP Revenue $21.0 million $13.4 million 57.0%
GAAP EPS a $0.22 $0.12 83.3%
Tax Rate 21.5% 29.9% -28.1%
Fully Tax-Adjusted EPS $0.19 $0.11 73.7%
Fully Diluted Shares b 25,313,241 24,699,615 2.5%

a EPS includes approximately $0.02 due to a reclassification of marketing rebate of approximately $716,478 from selling expenses to net revenues.

b CAGC plans on affecting a 4 for 1 reverse split which should help the Company qualify for an upgrade to a senior exchange.

Select Valuation Items

  • Price: $3.05 (8/26/09)
  • Fully Tax-Adjusted Trailing EPS: $0.46
  • Tax-Adjusted P/E: 6.63
  • Book Value Per Share: $2.91

The GeoTeam owned China Agritech (OTC:CAGC) in the past, but sold the stock when it appeared that above average EPS growth was not materializing. Leading up to this quarter, we were largely unimpressed with the Company's recent EPS growth trend.  However, we re-established a small position in China Agritech stock based on low valuation statistics. Furthermore, the Company has an overall strong balance sheet, despite an ongoing issue with accounts receivable.  After listening to a replay of the CAGC second quarter call, the GeoTeam believes:

  • There is a good chance that the second quarter earnings per share levels may be maintained going forward, due to the accelerating contribution from its non-liquid granular fertilizer product line.
  • The accounts receivable issue will soon be rectified.

The author feels that China Agritech offers an interesting risk/reward opportunity. A key to successful investing is identifying depressed companies that are about to go through dramatic operating changes leading to an expansion of valuation multiples. An Improved earnings outlook, combined with a stronger balance sheet, could be the catalyst for such an situation.

Disclosure: Long CAGC.OB



If you like us, spread the word to the fellow investors on your favorite Social Bookmarking websites
Reddit! Del.icio.us! Mixx! Free and Open Source Software News Google! Live! Facebook! StumbleUpon! TwitThis Joomla Free PHP
 

!!! CHINAVESTOR.COM is for SALE !!!

BUY this domain with all its credentials. Chinavestor.com has been added to Google News and Finance since 2008! Huge web traffic upside potential! Website is optimized for Chinese stocks but can easily be tweaked. Contact Seller Here

sale1
G_news
Check out The Benefits of Getting into Google News!

Free weekly newsletter

Get hot China stock news every Monday