China Green Agriculture Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Chinese fertilizer producer China Green Agriculture (NYSE: CGA  ) were growing like weeds today, gaining as much as 23% in intraday trading after a strong earnings report.

So what: U.S. investors have had plenty to think about on their home shores lately, so the troubles among Chinese small caps have been mostly relegated to a back burner. With its year-end report though, China Green made another bid to convince investors that it is truly the real deal. For its fiscal fourth quarter, the company delivered revenue growth of 272% and per-share profit growth of 52%. The respective revenue and earnings tallies of $60.3 million and $0.38 both topped Wall Street's estimates. The company's CEO cheered the strong performance of an acquisition made last summer and said that the company has "established a solid track record that we can replicate in the future."

Now what: Performance is only part of the issue when it comes to Chinese small caps like China Green. After a rash of companies dabbling in varying flavors of fraud, investors have become deeply skeptical of the entire segment of the market. That means that China Green has an uphill battle in convincing investors that its success is legitimate, but it also means that if there is veracity behind the numbers, investors can pick up shares at ridiculously cheap prices today. On the basis of the company's just-completed fiscal year, shares currently change hands at a mere 3.9 times earnings.

Want to keep up to date on China Green Agriculture? Add it to your watchlist.

The Motley Fool owns shares of China Green Agriculture. Motley Fool newsletter services have recommended buying shares of China Green Agriculture. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
 

Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On September 09, 2011, at 5:14 PM, arieckeg wrote:

    Why is there no way for the SEC to issue a statement that the numbers just posted by CGA have been verified as true? If the SEC truely can't do that, then the US market system is broken, and all buyers of US stocks beware.

  • Report this Comment On September 09, 2011, at 8:58 PM, TMFKopp wrote:

    @arieckeg

    Because that's not what the SEC does. They don't have anywhere near the resources that would be needed to go in and verify the numbers at every filing company. That's the job of the auditors, but, unfortunately, the auditors have done a really crappy job in a number of cases.

    Matt

  • Report this Comment On September 10, 2011, at 8:00 PM, TruffelPig wrote:

    Usually one should check the SAIC versus SEC report. If they are very different I would take that as a serious warning. Also, how much tax does the company pay on the earnings is a helpful thing to investigate. If the tax is very small usually it means that I wouldn't trust the books. The tax in the SAIC report is meaningful.

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