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 issued FY08 EPS guidance of 96 cents to $1.10. The Street had been expecting 96 cents. Earlier this week, it followed that news with word that it had entered into agreements to acquire majority ownership of several more commercial hog farms in southern China provinces. The deal involved a price less than three times projected 2008 net income for the businesses.
FEED shares
popped on both announcements and has now begun to consolidate the gains in a bullish "flag" pattern. Equities frequently exit flags moving in the same direction they were traveling on entry. In this case, that would be to the upside.
The brokerage community recommends the issue with one "buy". 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 $5.00 and $18.20. A stop-loss of $14.60 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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Reader Comments (Page 1 of 1)
4-18-2008 @ 3:19PM
Michael Schneider said...
FEED stopped its march higher yesterday when the company announced it is selling more shares to invest in the Chinese hog farms.
By some measures the stock is not cheap. It has good earnings however and check out the balance sheet- virtually no long term debt.
4-18-2008 @ 4:06PM
ldschutts said...
I think the normal mechanics of flag formation may be the significant factor here. The company will only be raising a modest $10 million with the new stock. It's just part of management's program of steady growth. Earlier this year, AgFeed bought majority stakes in five other Chinese hog farms for about $5.3 million.
Larry Schutts