2012 Is Crucial for Yongye
With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Yongye International (NAS: YONG) . As I discussed in more detail last month, Yongye got wrapped up in the mass of Chinese companies facing allegations of fraud and accounting irregularities. But there's only so long those allegations can remain credible if the company keeps posting strong results. That's why 2012 is a make-or-break year for the company. Below, I'll take a closer look at what people expect from Yongye International and its rivals.
Forecasts on Yongye International
|Median Target Stock Price||$4.50|
|2011 EPS Estimate||$1.11|
|2012 EPS Estimate||$0.91|
|Expected Long-Term Annual Earnings Growth, Next 5 Years||10%|
|CAPS Rating (out of 5)||***|
Source: Yahoo! Finance.
How will Yongye International do this year?
Analysts don't have very high hopes for Yongye. With earnings on the decline, the stock's target price is only 5% or so above its current trading value. Members of our Motley Fool CAPS community are also ambivalent about the stock, giving it a middling three-star rating.
Look only at Yongye's numbers, and you'd wonder why the company's shares aren't much more expensive. Both revenue and net income have jumped more than 90% over the past year, but investors certainly haven't embraced the stock like they have other agricultural companies. By contrast, CVR Partners (NYS: UAN) , which went public last spring, has seen similar growth, with net income nearly tripling and sales jumping 65% -- and its shares have risen more than 50%. Similarly, Terra Nitrogen (NYS: TNH) has benefited from fertilizer interest as well, with 42% sales growth and profits rising at pretty much the same rate as CVR Partners' -- and the shares are up even more sharply over the past 12 months.
But Yongye labors under concerns that no Chinese small-cap company has legitimate results. Even Morgan Stanley (NYS: MS) investing $50 million in the company hasn't overcome negative sentiment about it. China Green Agriculture (NYS: CGA) has seen a similar disconnect between conditions in the industry versus perception of its shares, with strong growth seemingly trumped by fear of the unknown.
At this point, every day the company keeps posting new results is a victory for shareholders, as it makes allegations of fraud increasingly unrealistic in the face of actual experience. If Yongye can make it through 2012 with another blockbuster year, investors may finally be able to believe the company is a real opportunity -- rewarding shareholders who get in early. But of course, any real evidence of problems for the company would likely stoke the fires for Yongye bears.
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At the time this article was published Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Yongye International. Motley Fool newsletter services have recommended buying shares of Yongye International and China Green Agriculture. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.
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