Skystar Bio-Pharma (NASDAQ:SKBI)

We have received inquires from GeoReaders regarding yesterday’s decision to remove SKBI from the GeoSpecial list. Due to market sentiment, the GeoTeam is taking a more stringent look at stocks on the whole.

We still believe SKBI offers great long-term value, however the most important factor fueling our decision lies with short-term EPS growth forecasts

Notes
-All EPS numbers in above table are Non-GAAP. Non-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items contained in the company's filings. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information. The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.
-2009 Annual estimates do not match the cumulative quarters due to varying share counts throughout the year. Rodman used a weighted average share count of 5.4 million for its 2009 annual estimate.

While sales will be up in each of these quarters going forward, dilution from its recent capital raise and a delay in its expansion plans are forecast to lead to unimpressive EPS growth for the next three quarters. Now, the company has been handily exceeding analyst estimates, but ultimately the GeoTeam requires EPS growth to justify inclusion in our GeoSpecial/Bargain List.   Part of our decision is also based on the fact that the stock had increased over 100% from our initial mention. 

It’s likely at some point that if the stock continues its retreat and/or begins showing progress on the EPS growth front, we will recode the stock as a GeoSpecial or GeoBargain. Also, value investors may still find SKBI’s low absolute P/E attractive. Rodman & Renshaw still has a price target of $16.00.

Skystar Bio-Pharmaceuticals shares opened sharply lower today in reaction to news that it has purchased an exclusive aquaculture vaccine technology.

The Good News:  New Vaccine Technology will address a Company-estimated $150 Million market opportunity.

The Bad News: The Company's highly anticipated Veterinary Vaccine Facility Launch will now occur in its 2010 first quarter rather than the 2009 fourth quarter. Thus, the company reduced its revenue guidance to $44.0 to $46.0 million vs. analyst estimates of $52 million.

The GeoTeam® believes, that overtime, some investors may view the drop in shares as a buying opportunity:

• The company has been beating estimates, which gives some hope that guidance may be conservative. 
• The company's guidance is based on organic growth.  Skystar Bio-Pharmaceuticals has previously stressed that acquisitions are part of its growth strategy, providing another reason that its guidance may be conservative.
• The acquired technology significantly improves long-term growth profile.

Source: Marketwire (December 9, 2009)

Skystar Bio-Pharma third quarter results easily surpassed analyst expectations as well was ours.

Although EPS growth was down for the quarter SKBI still crushed analyst split adjusted estimates of $0.42.  The company is working through dilution of a recent offering being used to accelerate growth gong into 2010.  Analysts estimates of $2.18 for 2009 and $4.22 for 2010 may be conservative.

^aNon-GAAP EPS Figures exclude certain non-operating gains and losses as well as certain non-cash items contained in the company's filings. Non-GAAP information should not be viewed in isolation or as a substitute for reported, or GAAP information . The GeoTeam® non-GAAP figures may, from time to time, differ from company supplied figures.