Another quarter, another blowout earnings report for Yongye International (Nasdaq: YONG). As we've come to expect, the earnings report from this little Chinese maker of organic fertilizers blew right past Wall Street's overly conservative projections. Unfortunately, as we've also come to expect, that didn't matter a whit.

Yesterday, Yongye confirmed that it had earned $0.77 in profit per diluted share, trouncing the analysts' predicted $0.48 profit. Revenues of $155 million eclipsed projections of $103 million by 50%. With Yongye putting up numbers like these, you've got to figure that Morgan Stanley's (NYSE: MS) feeling pretty good about the 20% preferred stake it took in Yongye a couple of months ago. The rest of us? Not so much.

You see, after reporting a 42% year-over-year increase in profits, and a 73% increase in net profit, Yongye's common shares gained all of 3.5% in market cap.

Huh?
Why did investors react with barely more than a shrug to an apparent blowout quarter? While impressive in isolation, Yongye's performance doesn't look nearly so exceptional alongside the rest of the fertilizer industry.

In their most recent quarters, both CF Industries (NYSE: CF) and Agrium (NYSE: AGU), for example, posted revenue growth of roughly 40%. Industry giants Mosaic (NYSE: MOS) and PotashCorp (NYSE: POT) reported sales growth of 54% and 64%, respectively, while Intrepid Potash (NYSE: IPI) topped everyone with a sales gain of 93%!

In that context, Yongye's performance was only middle-of-the-road. And in one crucial aspect, it was downright back-of-the-pack.

Show us the money!
Four months ago, I turned from Yongye skeptic into Yongye fan when the company "finally" began generating real free cash flow from its business. After years of shoveling cash onto the metaphorical compost pile, Yongye ended last year with $4.9 million in trailing free cash flow.

Not anymore. In contrast to every one of its peers but Agrium, Yongye burnt enough cash last quarter to leave its trailing-12-month FCF at a negative $10.8 million. To me, this number is more disappointing than anything the Chinese small-cap skeptics can tell me about Yongye. In fact, it's so bad that I'll probably sell my shares.

Will you do likewise, or do you think Yongye can pull another rabbit out of its hat? Add the stock to your Watchlist and find out whether you're right.