Promising Stocks in the Bargain Bin: Noah Education

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Of all the tidbits of insight I've heard over these few crazy months, the most telling came from an investor who appeared on CNBC last fall and, being completely serious, advised, "There're only two positions to be in right now: cash, and fetal."

Panic, anyone?
I get it. It's brutal out there. Many companies that overleveraged their balance sheets are permanently impaired and will likely never rebound -- Citigroup (NYSE: C) and Sirius XM Radio (Nasdaq: SIRI) come to mind. We had an unprecedented boom; now we're in the middle of an unprecedented bust.

Nevertheless, history tells us time and time again that market panics and forced selloffs indiscriminately throw the good out with the bad. Amid the frenzy over financial markets and the "sell-now-ask-questions-later" mood of global investors, opportunities are being created for bargain-hunting investors like we haven't seen in decades.

Using the wisdom of our 125,000-member-strong CAPS community, I've come across what could be one of those bargain opportunities, Noah Education (NYSE: NED).

CAPS Rating  (5 max)	****
1-year performance	(54.3%)
Recent share price	$3.10
2009 EPS estimates	$0.31
TTM EPS	$0.48
Market cap	$125 million
Total cash & short-term investments	$153 million
Total debt	Zilch. Nada.
Fools bullish on NED are also bullish on:	Apple (Nasdaq: AAPL), General Electric (NYSE: GE)
Fools bearish on NED are also bearish on:	Toll Brothers (NYSE: TOL), MasterCard (NYSE: MA)

Data from Motley Fool CAPS and Capital IQ, a division of Standard & Poors, as of Feb. 19. TTM = trailing 12 months.

Headquartered in China, Noah creates and distributes interactive education material, supporting textbooks and using handheld digital-learning devices. Since going public in late 2007, shares have tanked after Chinese euphoria evaporated and the global economic slowdown took its toll on China's budding middle class.

With shares down some 84% since going public, many think the pain has been way overdone. CAPS member yzfinance is one of them, pointing out last fall:

Based on a pure valuation approach, [Noah Education] is selling for less than current assets. ... It could, of course, get cheaper, but buying 1$ using 70 cents or 40 cents are both advantageous in my book. The profits are dropping but [Noah Education] is still adding to their book value. They operate in a market where children education is given primordial importance. ... In a country where the standards of living is rising, more money will become available in the education market. ... Noah, in this environment, is one of the bigger companies and benefits from some brand-name recognition, and coupled with its rock-bottom price, should produce interesting results.

On the valuation front, Noah currently trades at ten times 2009 earnings estimates, and 7.5 times 2010 estimates. For a Chinese company poised to exploit the promising (albeit less meteoric) growth of China's middle class, those multiples are nothing to sneeze at.

Even better, Noah doesn't hold a lick of long-term debt and has the equivalent of $153 million in cash and short-term investments on its balance sheet. For a company with a market cap of around $125 million, that's about as close as you'll come to "money for nothing."

You take it from here
Disagree? See it in another light? Just want to see what the rest of the pack is saying? More than 125,000 investors use CAPS to share ideas and swap opinions. Click here to check it out. It's 100% free to participate.

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