Friday, August 20, 2010

WOW! That's a Low Price!

There are some stocks out there that are just screaming, WOW! That's a low price. One that I love, that's seemingly getting zero attention is China Advanced Construction Materials (CADC). This company grew revenues 44% from 2008 to 2009 and grew net income by 100%. With China's alleged push to focus on being more green, it seems that CADC's business consisting of ready-mix concrete is in a great position to benefit from this. Not to mention goverment backing, as they have been given $7+ million in high speed rail contracts. In a recent press release their CFO blatantly stated that "companies stuck in the commodity building materials business model of just a couple years ago will not be able to compete in the new, high-tech, eco-conscious building materials paradigm rapidly evolving in Asia." This is perfect for China ACM, as their business model is not only built around what looks to be the future of China, but it is built around a segment of the concrete industry that has been showing 27% growth over the last 10 years and is expected to continue. Furthermore, in China 40% of their of concrete work is ready mix, 60% is on site. In so called "developed countries" this ratio is 80-20. Room for improvement and expansion of ready-mix in China? I think so!

When it comes to future earnings, as far as I can tell, this company currently has the means of cranking out around 60 million in revenue for 2010. While this may not seem like overly extreme growth from the 39 million in revenue of last year, the fact that their three business segments sales, manufacturing, and technical services produce margins of 10%, 40%-60%, and 90% respectively makes this number look more appealing. All my calculations were done by taking numbers in their July 2010 presentation on their website and using a fully diluted share count of ~18 million. I get an estimated EPS to be $1 per share give or take. That means right now CADC is trading around 3.5X forward earnings. And to that, I say,

WOW! That's a low price!

1 comment:

  1. Sounds like CADC is a good long-term investment. What's frustrating to me is something Steven Sears wrote about in Barrons recently. He noted that "the world trades as one in the U.S. financial market." Correlation is at extremely high levels among different countries. For example, even though emerging markets in Brazil, Taiwan, China, and South Korea are experiencing much higher growth rates than the United States, the correlation between the S&P 500 and ETF ishares MSCI Emerging Markets index (EEM)is very high.

    This suggests that investors think the U.S.' economic problems will be bad for all stocks, regardless of growth rate or sector. So great stocks like CADC might flounder as long as the U.S.stock market does.