AgFeed Industries (NASDAQ: FEED) is
the top premix feed company in China, operating through subsidiaries that develop and manufacture blended feed and feed additives for the Chinese domestic pork husbandry market. One division also makes premixed chicken feed. Products are sold through over 500 independently owned sales agents, concentrated in key agricultural regions across the country. AgFeed also operates its own hog farms. It is currently ranked as the second largest commercial hog producer in the country.
The firm pleased investors last week, when it reported Y07 EPS of 25 cents and revenues of $36.16 million. The Street had been expecting 25 cents and $36.0 million. Management also guided FY08 EPS to $0.96-$1.10 ($0.96 Street) and FY08 revenues to $135.0 million ($134.88M Street). The company anticipates doubling the number of stores in its AgFeed product chain by the end of the year.
The stock
popped above 30-day moving average support on the news and then moved into a bullish "pennant" consolidation pattern. Prices frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.
The FEED Sales Growth rate (321%), EPS Growth rate (257%), Net Profit Margin (18.42%), Return on Assets (43.92%), Return on Investment (58.25%) and Return on Equity (58.25%) compare favorably with industry, sector and S&P 500 averages. Institutional investors hold about 2% of the outstanding shares. Over the past 52 weeks, the stock has traded between $4.60 and $16.36. A stop-loss of $10.75 looks good here.
Larry Schutts is a contributing editor for Theflyonthewall.com and the Vice-President of Stockwinners.com. He does not hold a position in the stock discussed above.
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