Regardless of this order for $23m order for pure magnesium CHND.OB’s fundamentals are highly undervalued at its current trading price and think around $6/share would be more fairly valued. Let me quote myself from my prior analysis:

“Looking forward CHND gave 2007 full year guidance of $120m in revenues, recently raised from $100m. And Net income of $6m raised from $5m.  Now looking at the forward ratios CHND looks very cheap at its current levels with much room to run into the future in light of catching up with its growth.

At todays closing price 3.50 CHND is a very small company at $46m with a low float of just $13.2m shares O/S giving CHND the ability to become very volatile. At just $46m market cap CHND is expecting almost 3 times this amount in revenues for 2007 giving it a very attractive forward price to sales ratio of .38.

The forward P/E of CHND.OB looks very attractive as well,given that CHND doesn’t issue more shares through dilution, they are expecting to have .45eps for full year 2007 placing their forward Price to earnings ratio at a low 7.77 making CHND look very cheap from this perspective being that the management services industry average P/E ratio is 344% higher at 34.5x earnings”

CHND is trading way below the industry averages and fundamentals are looking great as well looking into its future growth as a stock and company. Unfortunately the bearish activity after i made my first purchase forced me to cut my losses short to minimize the damages.

Though now after the announcement of this $23m contract through CHND.OB’s subsidiary’s  a considerable amount of volume has came in giving CHND a solid rally which lead to an intra day breakout on the 60 minute chart. I’m thinking that this stock might just require some patience as its under the radar and its fundamental valuation is not known to the general public.  I really don’t see CHND trading below $3/share any time soon again and in the long run it should breach the $4 mark and possibly head towards $6/share.

The last 3 sessions with sequential growth in volume makes me feel that the bulls might be back on this block, I’m willing to bet on it and buy some shares and let the fundamental facts pay due.

This entry was posted on Wednesday, June 20th, 2007 at 8:42 am and is filed under Small Cap Stock Picks. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.