Gulf Resources Inc. (GFRE) recently raised full year guidance as the bromine market in China remains hot. It has a PEG ratio of just 0.3.
You might not be able to tell from the name but Gulf Resources Inc. is a Chinese company.
It operates two wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited (SCHC) and Shouguang Yuxin Chemical Industry Co. Limited (SYCI), which produce bromine, crude salt and specialty chemical products used in a variety of industries including oil & gas field exploration and papermaking.
Share Repurchase Program Announced
What else is there to do with extra cash? On Sep 27, Gulf Resources announced it was authorized to start a $10 million share repurchase program which will be in effect for the next 12 months.
“Given our solid market leadership position, strong track record of business expansion and healthy balance sheet, we believe that our stock is deeply undervalued,” said Mr. Xiaobin Liu, CEO of Gulf Resources.
Raised Full Year Guidance
Strong demand for bromine in China, especially from the pharmaceutical sector, has pushed up bromine prices all year. Given the pricing environment, the company has been renegotiating contract prices with customers.
The new prices will be effective starting October. The company believes the bromine price increases are sustainable in the foreseeable future.
Therefore, Gulf Resources has raised its full year revenue guidance to a range of $151 million to $155 million from $146 million and $150 million. This is an increase of 37% to 41% over 2009 revenue of $110.3 million.
Earnings per share are now expected between $1.38 and $1.44 per share, an increase of 57% to 63% over 2009.
Zacks Consensus Estimates Rise
Given the company’s guidance revision, it’s not surprising that the estimates have also been revised.
The 2010 Zacks Consensus Estimates is up 2 cents to $1.40 per share in the last month. This is still on the lighter side of the company’s earnings projection range of $1.44.
This is earnings growth of 35.1% over 2009. Earnings are also expected to rise another 8.9% in 2011.
Gulf Resources is expected to report third quarter results on Nov 8.
How Cheap Is Gulf Resources?
Gulf Resources is a true value stock.
It is trading at just 5.2x forward estimates, well below its peers at 12.2x and the S&P 500 at 14.4x.
Its price-to-book ratio is 2.5, well within the value parameters.
The company also has a crazy return on equity (ROE) of 111%. Its peers are at just 10.5%.
Gulf Resources is a Zacks #1 Rank (strong buy) stock.
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Dear Gents,
i read your article about GFRE and i d like your opinion about SKBI (Skystar) , NIV (NIVS Intellimedia) , AMCF (Andatee). All are in Nasdaq.
Your prompt response will be highly appreciated.
Thank you,
GP