I came across CPHI.OB today after it made its bullish breakout during fridays session and became quite interested. Due to lack of internet connectivity i wasn’t able to get to the internet to perform any additional research over the weekend.
About China Pharma Holdings, Inc.
China Pharma Holdings, Inc. develops, manufactures, and markets generic and brand bio-pharmaceutical products in China that treat a wide range of conditions, including infections, hepatitis, vascular, CNS and other prevailing diseases. Helpson Bio-pharmaceutical Co., Ltd (Helpson), a specialty bio-pharmaceutical company headquartered in Haikou City, Hainan province in China, is a wholly owned subsidiary of China Pharma Holdings. For more information on the Company please go to http://www.chinapharmaholdings.com .
This play is very similar to our current position of CHME.OB as an undervalued Chinese Drug retail stock. Although with CPHI.OB it seems is grabbing more interest as momentum and volume have been steady gaining over 100% in the last month or so. Regardless of the massive sustained gains CPHI.OB is trading at an extremely low multiple of just 10.95x earnings compared to the industry 30x earnings. Currently with CPHI.OB’s multiple and trading price of just 3.43 its apparent that this stock is depressed in valuation. Given a fair valuation in its industry in light of their “past” results CPHI should be trading near $9.3/share. We get this price by multiplying the present EPS of .31 times the 30x average earnings multiple. CPHI.OB stated they expect forward growth of at least 30% year over year so we could expect EPS of at least .40 for the upcoming reported year giving us a forward valuation near $12/share. Though this estimate seems fairly conservative as CPHI is growing at a much faster rate currently than 30% with an increase of 81% and 67% respectively in revenues and income for the first half of 2007 over last year. So considering its current growth and Chinas increasing market size i think 50% growth for next year may be more realistic giving CPHI a fair of near 13.95/share calculated by .465 estimated earning x the industries 30x earnings multiple.
This stock looks dirt cheap with strong growth and an extremely bullish chart to say the least. I think any chance to buy on a dip is a good bet with this stock which is what i plan on doing. Though with the current momentum this could take off with out giving us a chance to buy on a dip currently as todays low dipped near the midpoint support of the breakout candle which suggests a possible bottom and continuation in play. Although, todays bearish inverted hammer suggests a possible hault in price and consolidation in play. Ohhhh the controversies and contradictions….. One thing is for sure, and that is the fact that this stock looks way undervalued and attractive at these prices. I may look to fill 1/2 soon on this momentum and buy again on a dip if i get the chance.
Recommendation: Buy the dips, limit position sizing on Momentum buys.
