Gulf Resources, Inc. (GFRE) just raised its full-year outlook, which pushed shares to breakout of a bearish trend. Additionally, shares are trading with great valuations.
Company Description
Gulf Resources make bromine, crude salt and other chemicals through 2 wholly-owned subsidiaries. Both are located in China and the chemicals are used in industrial manufacturing and agriculture applications.
Bullish Outlook
On Apr 14 Gulf Resources raised its full-year guidance. The new estimated earnings range has a midpoint of $45 million, up from $37 million. Gulf Resources’ revenue forecast has a median of $148 million, up from $130 million.
If the company’s expectations are met, earnings growth could be as high as 50% in 2010. Analysts have not had time to revise estimates since Gulf Resources’ announcement.
Chinese Growth
China has been making headlines for its robust economic growth, amongst other areas. The most recent news came when Chinese officials reported an 11.9% growth in the first quarter of the year.
While China’s booming economy is not a new story, it does continue to grow at a break-neck pace. Fortunately, the inflationary pressure is not too bad. Consumer prices in China were up 2.2%, which subdues the likelihood of raising interest rates.
Upcoming Acquisitions?
Not only is Gulf Resources ramping up its own production, but it is also looking to make 1 or 2 acquisitions before the end of 2010. Whether or not the expected deals impact 2010 earnings, it would increase the growth potential in the future, which is expected to be flat right now.
Good Valuations
Shares of GFRE are trading at just 8.5 time forward earrings, despite its expected growth. The PEG ratio this Zacks Rank #1 is coming in at deep discount of 0.3.
Earnings History
On Mar 3 Gulf Resources reported fourth-quarter results that showed a 22% jump in revenue, to $29.4 million. The higher revenues lead to net income of $6.8 million, up 8.6% since the same period one year ago.
Earnings per share came out to 25 cents, 4 cents above expectations. This was the first quarter that analysts were providing estimates for the company, so earnings history is light.
The Chart
Sharse of GFRE broke out of a downward trend on the raised guidance. The MACD is also showing a shift in momentum and is ont he verge of producing a buy signal.
Bill Wilton is the Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the market-beating Zacks Growth Trader service Zacks Investment Research
