Going green should also mean putting some green into your pocket. Guanwei Recycling Corp. (GPRC) is piling up the green as its latest earnings rose 107% on a 73% revenue increase.
WOW!
And the stack is only going to get fatter. Mr.Chen Min, Chairman and CEO of the Company says, “The expansion of our import quota certainly was the most significant event so far this year, positioning us to meet the strong and growing demand for our product over the foreseeable future.”
According to Yahoo.com, analysts expect Guanwei to earn 63 cents for 2011. At the private universities with $40,000 annual tuition rates, the 1600 SAT types are taught that a P/E ratio equal to earnings per share growth rate is acceptable.
In GPRC’s case, a PE of 73 (revenue growth) to 107 (earnings growth) would be right on target. In fact, the average company in the industry is growing revenues by 15.5% with an average P/E of 20.
So what would you expect to pay for a company growing earnings by triple digits? 25, 50, 75 times earnings? More? Well, you are going to feel like a thief buying Guanwei at a trailing 12 month P/E of only 1.91.
The bargain bin valuations doesn’t end at P/E. GPRC trades at 40 cents for every dollar per share they do in sales, and less than its book value of $1.29 per share. Meanwhile, industry peers trade at $1.19 per dollar per share in sales, and most high flying green companies trade at 3 times book value and higher.
If Guanwei continues to race up earnings and revenues at a highway speeding ticket pace, then shares shouldn’t be a steal for too long. Put the stock price in line with competitors’ valuations and its growth rate, and double from here is not unreasonable.