Fuqi International (FUQI): Shares define bullish 'pennant' formation

Posted Aug 19th 2008 12:12PM by Larry Schutts
Filed under: Earnings Reports, Technical Analysis, Stocks to Buy

Fuqi International (NASDAQ: FUQI) designs, develops and sells precious metal jewelry in the People's Republic of China. It offers rings, bracelets, necklaces, earrings and pendants made from such precious metals as platinum, gold, palladium and karat gold. The company also manufactures jewelry with diamonds and other precious stone inlays, as well as gold coins and gold bars. Fuqi International was founded in 2001 and is headquartered in Shenzhen.

The firm surprised the Street last week, when it reported Q2 EPS of 25 cents and revenues of $66.9 million. The Street had been looking for 20 cents and $62.8 million. Management also guided Q3 EPS to 26-27 cents (21 cent Street), Q3 revenues to $75-$77 million ($70.6M Street), FY08 EPS to $1.07-$1.09 ($1.08 Street) and FY08 revenues to $325-$333 million ($314.2M Street).

The FUQI price popped on the news and then moved into a bullish "pennant" consolidation pattern. Stocks frequently exit pennants moving in the same direction they were traveling on entry. In this case, that would be to the upside.

Brokers recommend the issue with one "strong buy" and one "buy". Analysts see a 35% average annual growth rate, through the next five years. The FUQI P/E ratio (9.82), PEG ratio (0.26), Price to Sales ratio (0.99), Price to Book ratio (1.93), Price to Cash Flow ratio (10.57), Sales Growth rate (154.47%), EPS Growth rate (234.87%), Return on Assets (22.91%), Return on Investment (32.75%) and Return on Equity (32.75%) compare favorably with industry, sector and S&P 500 averages. Over the past 52 weeks, the stock has traded between $6.02 and $11.95. A stop-loss of $9.00 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.

Tags: fundamental analysis, FundamentalAnalysis, FUQI, Fuqi International, FuqiInternational, momentum, pennant, technical analysis, TechnicalAnalysis