Focus Media (FMCN) is a Zacks #1 Rank (Strong Buy) after analysts raised estimates on a recent earnings surprise. Investors are buying in as analysts continue to raise forecasts.
Company Description
Focus Media is a targeted interactive digital media company in China. The company has over 200,000 LCD displays across the country.
Revenue Jumps 48%
On Aug 22 Focus Media said its second quarter revenue came in at $166 million, which is 48% higher than the same period a year ago. The company is seeing demand pick up as well as improving spending by Japan’s automakers.
Earnings worked out to $0.34 per share, 7 cents higher than the Zacks Consensus Estimate. Focus Media has topped expectations in 4 of the past 7 quarters.
Excellent Growth
After management gave some optimistic guidance, analysts raised their earnings estimates once again. The Zacks Consensus Estimate for 2011 is up 8 cents, to $1.24. Next year’s forecasts are averaging $1.58, a 9-cent increase.
In 2010 Focus Media brought in just $0.34 per share, so the expected growth rates are 265% this year and another 27% in 2012. Share of FMCN are trading at 16 times the 2012 consensus, which give it a PEG ratio of just 0.6 times. Not a bad value.
Industry Leader
Focus Media is the top-rated media company of the 18-company group on Zacks.com. Taking a quick look at the financials and it is easy to see why. The net profit margin is almost 36% compared to the average of 4% amongst its peers.
FMCN has an ROE of 13.2%, almost 3 times higher than the industry average.
The Chart
There is plenty of risk in Chinese stocks these days. But if FMCN is legitimate, this is a great time to get in. Those valuations are solid and the stock now has some great momentum after the earnings surprise turned things around.
Bill Wilton is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Small Cap Trader service
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