China Valves Technology, Inc.
) recently reported a fantastic quarter, which sent estimates higher. However, shares have been under pressure thanks to accounting scandals in other Chinese companies.
But, everything looks good for this Zacks #1 Rank (Strong Buy), which is trading at a fantastic entry point.
China Valves makes metal valves for the electricity, petroleum, gas, chemical, water, and metallurgy industries in Asia and Europe.
On Nov 10 China Valves reported net revenue of $55.3 million, which is up about 98% on a year-over-year basis. Net income surged from $3.8 million, to $15.9 million.
The record-setting quarter was driven by a combination of acquisitions as well as strong demand from its end markets.
Earnings per share came in at 44 cents, 12 cents ahead of the Zacks Consensus Estimate. This was the third earnings surprise in the past 4 quarters.
Double-Digit Growth Rates
China Valves analysts raised full-year estimates for 2010 and 2011 after the earnings news hit the wire. The Zacks Consensus Estimate for 2010 is up 9 cents, to $1.33.
Next year's projections are up 12 cents on average, to $1.56. If China Valves hits these targets, the annual growth rates will be 66% this year and another 17% next year.
China is Cheap
Many Chinese stocks are under pressure lately, as questions about legitimacy have risen at several firms. The latest being RINO International (RINO), which recorded revenue from contracts it didn't actually enter into. One point of concern that sent CVVT lower, is that the company does goes through the same auditing firm as RINO.
That story, amongst a few others, is one reason you can get shares of China Valves for about 7 times forward earnings. The PEG ratio is showing a steal at 0.4 times. So, if you can stomach the volatility and are willing to take the risk, this is a great value. Assuming China Valves has no accounting issues in the future, of course.
In the chart below you can see that hit that CVVT took on the RINO news, which started to percolate just after China Valves's earnings release. Shares are starting to recover, but have plenty of room to keep climbing.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Small Cap Trader service