China Cord Blood (CO) is a $190.72 million small-cap Hong Kong based life sciences company. This enterprise is involved in the storage of umbilical cord blood stem cells for use in rapid developments in life sciences research and for rapid clinical applications using stem cells.
The company provides the following services to the parents of newborns: cord blood collection, laboratory testing, cord blood processing, and stem cell storage. Its laboratories are custom made and in compliance with national clean-room laboratory benchmarks and GLP standards. The facilities are safeguarded with computerized security systems to ensure safety and quality control.
(Click to enlarge)
Valuation
China Cord Blood is undervalued with a trailing PE ratio of 10.44, a forward PE of 9.59, and a PEG of 0.40. The stock is trading at only 1.09 times its book value per share. This is a nice low valuation representing an attractive entry point for the stock.
Profitability
The company has a wide profit margin of 31.1% and an operating margin of 37.66%. It had a 20.7% increase in gross profit from Q2 FY2012 over Q2 FY2011. This was on a revenue increase of 19.1% over the prior year period. Operating income increased by 29.2% over the prior year period. Its earnings per share are $0.25.
Subscriber Growth
Over the last five years, it has grown its subscriber base from 23,000 to over 200,000 through the development of the Beijing and Guangdong markets. These two markets have a market size of 1.2 million newborns per year. Operations in Zhejiang raise its market size by 500,000 newborns per year.
CEO Ms. Ting Zheng stated that she and her team are confident in the company's future growth momentum and the competitive strengths that will drive further growth.
Earnings Expectations
One of the beauties of China Cord Blood Corporation is its strong above average expected earnings growth. CO is expected to grow earnings annually at a healthy 25% for the next five years. If it can manage to meet or beat these targets, CO's stock can reasonably reach $7 - $8 per share by 2017. This would result in a 170% - 200% total gain over five years.
The company will report earnings for Q3 FY2011 on 2/27/2012. Out of its last 4 quarters, it has missed estimates once, exceeded estimates twice, and met estimates once. It has one upward earnings revision for the current fiscal year.
Conclusion
With an investment in China Cord Blood, investors have the potential to more than double the performance of the S&P 500. They can also feel good about the investment knowing that the company helps save lives ethically by helping to cure 75 types of blood, tumor, and central nervous system diseases.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
No comments:
Post a Comment