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Aggressive Growth

Gulf Resources Inc (GFRE) recently announced great results and went on to raise guidance, thanks to improving demand and higher pricing.

This Zacks #1 Rank (Strong Buy) has great growth potential but is still trading with very cheap valuations.

Company Description

Gulf Resources owns 2 chemical companies in China. The companies make chemical products for several different industries, including agriculture, oil & gas exploration and papermaking.

Revenue Jumps 62%

On Nov 15 Gulf Resources announced a 62% increase in third-quarter revenue, to $44.8 million. The company's fantastic margins stretched that revenue to generate net income of $14.9 million, which is up 79% since last year.

Earnings per share came in at 43 cents, which is 9 cents better than the Zacks Consensus Estimate and 16 cents higher than a year ago.

While Gulf Resources benefited from a 50% increase in bromine prices, it also generated higher sales volume as well. Later in the earnings release the company guided higher thanks to that strengthening demand and price improvement.

Double-Digit Growth

Forecasts for Gulf Resources are on the rise, pushing annual growth rates to 41% this year and 14% next year. The Zacks Consensus Estimate for this year is up 7 cents, to $1.47. Next year's projections are up 14 cents on average, to $1.67.

Even with those attractive growth rates and the earnings momentum shares are still trading with cheap valuations. The forward P/E is only 7 times and the PEG is just 0.4 times.

The Chart

Shares of GFRE have not moved much on the earnings news because of some worries about other Chinese companies reporting fraudulent results. While there is no guarantee that Gulf Resources (or any company in any country, for that matter) is not doing the same, the result is a good stock for a cheap price.

Gulf Resources Inc - ticker GFRE >
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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

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