Yuhe Intl (PINK:YUII)

The GeoTeam® is strongly considering coding Yuhe Intl as a GeoBargain. We currently have the stock coded as a GeoSpecial and a GeoBargain on the radar. We had held off on a GeoBargain designation due to 2010 analyst EPS estimates being less than 30%. However, current estimates have YUII EPS growing 32% to $1.07 ($0.81 tax adjusted) . With a forward P/E of 9.88, value investors may also take a liking to the fact that the company has completed capacity expansion plans with further plans to expand capacity in 2010.

Source: PR Newswire (December 22, 2009)

Special situation initiated @ $5.10

On August 14, 2009 Yuhe Intl reported strong second quarter financial results, slightly exceeding analyst estimates.

Highlights:

• Revenue increased 75.5% to $9.8 million
• Fully diluted EPS increased 81.2% to $0.13. 
• Company maintains fiscal 2009 guidance of $50 million in total revenue and $13 million in net income.

Using the current outstanding share count of 15,722,180, Company guidance implies an earnings per share figure of $0.83.

The share count of 15,722,180 seems like a reasonable assumption due to comments from the Company's most current 10Q filing.

"The Company expects that its strong positive working capital of $4.84 million as of June 30, 2009 will meet its foreseeable working capital needs for the next 12 months from the date of this report as management believes the Company would be able to renew the $8.3 million bank loans that are due in the next 12 months."

YUII is currently on the GeoBargains on the Radar list.  In order to upgrade to a GeoBargain, the company would need to attain earnings per share growth of at least 30%.  While analyst estimates indicate that the company will achieve this requirement in some of the upcoming quarters, the EPS growth rate is not forecast to reach 30% on an annual basis.

• 2009 annual EPS growth rate (taking into consideration that the company exceeded analyst estimates by $0.02): 9.6%
• 2010 annual growth rate: 17.5%

The GeoTeam® will code YUII a low tier GeoSpecial as a result of the stock's tax adjusted P/E to 2010 earnings per share growth statistics:

• Price as of August 14, 2009: $5.10
• 2010 tax adjusted analyst estimate: $0.60 ^a
• P/E on 2010 tax adjusted analyst estimate: 8.5
• PEG ratio based on 2010 earnings per share growth rate: 0.48

Why low tier?

Comment from 2009 second quarter press release:

"we expect the third quarter will be our best quarter of 2009 partly due to seasonality.

Analyst estimates do not echo this sentiment as they show the fourth quarter being the strongest quarter for 2009 and 2010.  A clarification is ultimately needed on this item as it could affect growth rate assumptions.

^a For valuation purposes, The GeoTeam® prefers to adjust EPS to reflect a tax rate of 36%.