Put bluntly, this is probably the riskiest stock alert we've ever put out. What makes it so risky? Well, since mid-June the stock price has done little but depreciate. In fact, it's down 95.6% from mid-June and approximately 77% from the beginning of last month.
So what makes it attractive to consider an investment now? China Yongxin Pharmaceuticals, Inc. (CYXN) appears to be incredibly undervalued and is growing at a steady, profitable pace. Let's run some numbers... in 2006, the company generated $38.99 million in revenues versus $47.82 million in 2007. Efficiency increased during this period of growth with the cost of sales to net sales percentage shifting from 92% to 83%.
Just last month the company released its financial results for Q3 2008 which revealed a revenue increase of 9.8% year-over-year. Notably, net income doubled year-over-year to $1.7 million, or $0.05 per diluted share. However, even with this consistent growth and excellent expenditure management, the stock is trading at a NEGATIVE P/E ratio! If it was valued at the same P/E as its peers, the stock would be trading over $1.30 a share! (As of yesterday's close, the stock was trading for only $0.065)
So what exactly does this company do? China Yongxin is a producer, distributor and retailer of pharmaceutical products and operates 93 drugstores. The company's products include Chinese traditional medicines, chemical pharmaceutical preparations, natural health products, healthy food, cosmetics, and medical equipment.
The pharmaceutical market in China is one of the most rapidly growing in the entire world. This burgeoning market is currently the ninth largest in the world, and is predicted to become the seventh largest by 2009. In 2012, the Chinese pharmaceutical market is projected to have a value of $44.6 billion, an increase of 180.7% from 2007.
While this seems like a "no brainer", it's important to keep in mind that the current down trend may not be over. However, the massive high-volume selloff that took place last week is one reason why we are optimistic at this time. Although the selloff might appear to be a bearish sign, it could be the final end to the downward pressure on the share price; otherwise known as capitulation.
http://www.breakoutinvestments.com/?q=node/506
$0.067 (12/03/08)
