2012 Is Crucial for Yongye

With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.

Today, let's take a look at Yongye International (Nasdaq: YONG  ) . As I discussed in more detail last month, Yongye got wrapped up in the mass of Chinese companies facing allegations of fraud and accounting irregularities. But there's only so long those allegations can remain credible if the company keeps posting strong results. That's why 2012 is a make-or-break year for the company. Below, I'll take a closer look at what people expect from Yongye International and its rivals.

Forecasts on Yongye International

Median Target Stock Price $4.50
2011 EPS Estimate $1.11
2012 EPS Estimate $0.91
Expected Long-Term Annual Earnings Growth, Next 5 Years 10%
Forward P/E 4.7
CAPS Rating (out of 5) ***

Source: Yahoo! Finance.

How will Yongye International do this year?
Analysts don't have very high hopes for Yongye. With earnings on the decline, the stock's target price is only 5% or so above its current trading value. Members of our Motley Fool CAPS community are also ambivalent about the stock, giving it a middling three-star rating.

Look only at Yongye's numbers, and you'd wonder why the company's shares aren't much more expensive. Both revenue and net income have jumped more than 90% over the past year, but investors certainly haven't embraced the stock like they have other agricultural companies. By contrast, CVR Partners (NYSE: UAN  ) , which went public last spring, has seen similar growth, with net income nearly tripling and sales jumping 65% -- and its shares have risen more than 50%. Similarly, Terra Nitrogen (NYSE: TNH  ) has benefited from fertilizer interest as well, with 42% sales growth and profits rising at pretty much the same rate as CVR Partners' -- and the shares are up even more sharply over the past 12 months.

But Yongye labors under concerns that no Chinese small-cap company has legitimate results. Even Morgan Stanley (NYSE: MS  ) investing $50 million in the company hasn't overcome negative sentiment about it. China Green Agriculture (NYSE: CGA  ) has seen a similar disconnect between conditions in the industry versus perception of its shares, with strong growth seemingly trumped by fear of the unknown.

At this point, every day the company keeps posting new results is a victory for shareholders, as it makes allegations of fraud increasingly unrealistic in the face of actual experience. If Yongye can make it through 2012 with another blockbuster year, investors may finally be able to believe the company is a real opportunity -- rewarding shareholders who get in early. But of course, any real evidence of problems for the company would likely stoke the fires for Yongye bears.

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Click here to add Yongye International to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.

Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Yongye International. Motley Fool newsletter services have recommended buying shares of Yongye International and China Green Agriculture. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.


Read/Post Comments (10) | Recommend This Article (10)

Comments from our Foolish Readers

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 January 18, 2012, at 12:23 PM, Swede46 wrote:

    I wish the author had done more than merely posting what Yahoo Finance shows for forecasts. There is only one analyst shown and he obviously hasn't updated his numbers. He still shows a forecast of 1.11 EPS for 2011 and the trailing 12 months earnings before 4th qtr numbers are out is already 1.70 Makes it difficult to believe they are going to lose a ton of money in their slowest quarter (fourth), and drop down to .91 next year when earnings growth has remained strong this year.

  • Report this Comment On January 18, 2012, at 12:29 PM, egarl wrote:

    The Motley Fool is all over the place on YONG.This article says they are basically crooks. In an article on 12/14/2011 Neha Chamaria says it is a top 3 pick and on 1/6/2012 John Maxfula says it has monster potential.

    This current article shows 2011 eps of $1.11 when YONG reported 9 mos eps of $1.65 and guided 2011 eps of $2.04.

    If you want to short it fine, but at least get the facts right.

  • Report this Comment On January 18, 2012, at 1:13 PM, DDDe wrote:

    I would have to agree. I don't think the author has done any homework around what Analysts think or if there are any up to date forecasts. These numbers are wayyyy off. If you researched the company for an hour before writing this article you should have been able to pick that out. I'm not sure if the author had a quota for getting articles out, but I expect better product from a MF.

  • Report this Comment On January 18, 2012, at 1:49 PM, sohu812 wrote:

    Dan,

    Wow, your researching skills are lacking. One analyst is your frame of reference? How about looking at their last earning report and forecast? Come on dude this is a huge disservice. Care to present the facts? Maybe you should just start over!

    Geez!

  • Report this Comment On January 18, 2012, at 2:36 PM, CSIHawaii wrote:

    I only read these Motley Moron articles because the readers are so smart.

  • Report this Comment On January 18, 2012, at 3:02 PM, CSIHawaii wrote:

    It obvious that the Yahoo Data has not been updated since June 2011. It is also obvious that the single analyst covering Yongye was either incompetent or part of the short syndicate. His/her past estimates were always way below any reasonable expectations. In the last 3 quarters up to June 2011 Yongye beat by 80%, 80% and 67%. While this was happening, the analyst did not adjust his/her estimates. I muse: If the analyst was fired, maybe he/she is now writing for the Motley Morons.

  • Report this Comment On January 18, 2012, at 4:39 PM, TMFGalagan wrote:

    @Swede46, and others -

    Thanks for the criticism and pointing out that I shouldn't rely on single data sources for estimates.

    All that said, I think the basic conflict here still holds -- and in fact is even more evident with higher earnings, as it makes the stock price even more out of whack with the fundamentals.

    2012 is crucial because at some point, investors will stop doubting earnings that justify a far-higher stock price -- unless the allegations of fraud prove true.

    best,

    dan (TMF Galagan)

  • Report this Comment On January 18, 2012, at 6:39 PM, kbsTMF wrote:

    dan,

    Saying, my numbers may be suspect but the basic article is still accurate is seems a bit silly. I think it can be said for most stocks in the market that 2012 will make or break them. That's not analyzing nor article worthy.

    Do the right thing and do a little research, look at the actual numbers, and resubmit this article. Unless of course, a bash was your goal.

    Max

  • Report this Comment On January 18, 2012, at 6:49 PM, kbsTMF wrote:

    Oh, and "allegations" seems fitting as long as defined as (1) below and not (2), as they come from only one source, known shorts who have a strong vested interest in smacking down a stock and no downside in lying.

    Definitions of 'allegation' [al-i-gey-shuhn]

    Dictionary.com - (Showing 1 definitions)

    (noun)

    1. assertion, typically about wrongdoing, made with little or no proof

    2. assertion made in a legal proceeding, which the party then undertakes to prove

  • Report this Comment On January 20, 2012, at 9:36 PM, tkell31 wrote:

    I have to laugh at all the people defending this "company" as if they need to convince themselves. Hey, if it is legit you are sitting on an easy 5 to 7 bagger in the short term and 10-14 in a couple of years. Weigh that against the stock being worth about two cents if they are reporting paper profits. Seems highly probable given this fits the EXACT same pattern of every other scam that it is a scam as well. With that being said if you feel the reward is worth the risk give it a shot. In a country where people work for seventy cents a day maybe fertilizer sells like hot cakes. Who knows? You might even be right and laughing all the way to the bank, just like the CCME, RINO, CHBT, CSKI, CAGC etc etc guys. Oh wait...

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