dantman859 YONG vs. CGA & CAGC

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YONG vs. CGA & CAGC 1-Jan-10 02:27 pm Hi all:

I'd like to start the new year with a small contribution re. comparative valuation of the 3 major fertilizer stocks most China investors are certainly familiar with. All 3 are excellent companies with excellent mgmt and growth prospects in a crucial subsector of Agriculture. This comparison is esp. timely since all 3 stocks have been hit recently for various reasons (esp. YONG and CGA) and all appear to be a good BUY at current levels. The tough question is: which one is currently the best Buy?

Note: I will try to remain as unbiased as possible by just focusing on valuation metrics. For comparison purposes I will assume an equal annual growth rate of 50% for all 3 stocks for the next 2-3 years to determine their PEG, which may be debatable but appears reasonable to me. The info is reprinted from ETrade as of Dec 31, 2009 closing.


Stock CGA CAGC YONG

Price 14.7 27.95 8.13
O/S 22.7 8.40 34.6 MM shares
Float 14.3 5.70 24.0 MM shares
Inst.
Own % 8.91 0.20 24.4

P/E 17.9 13.7 11.3 (non GAAP for YONG)
PEG 0.36 0.27 0.23
P/B 3.90 2.48 5.11
P/S 8.87 13.7 11.3

GM % 59.8 39.3 53.0 Gross Margin %
EBIT 50.5 29.4 32.9 EBITDA Margin %
NM % 43.1 22.5 29.8 Net margin % (non GAAP for YONG)

CRat. 5.27 5.63 1.67 Current Ratio
D/E 0.03 0.00 0.00 Debt/Equity
ROA 21.5 16.7 3.38 Return on Assets
ROE 25.6 19.0 5.83 Return on Equity
ROI 25.6 19.9 6.20 Return on Investment

Based on this comparison, it appears that YONG is currently the most undervalued of all three (based purely on P/E and PEG, not on Price/Book) but it has the smallest return ratios while CGA has certainly the highest profitability and margins. On the other hand, CAGC appears also very reasonably priced and the most poised for violent short-term/ mid-term moves due to its small float and
institutional ownership.