Acquisitions continue to hurt American Oriental Bioengineering's
The traditional Chinese medicine maker saw revenue increase 62% year over year, thanks in part to acquisitions, although organic growth still came in at a decent 23%.
Even with lower margins -- mainly owing to products inherited in the acquisitions -- the company was able to grow net income at a 38% clip. If American Oriental plans on becoming the Johnson & Johnson
While margins will likely continue to decrease with the addition of AOB's two newest acquisitions, the good news for investors is that the dilution should be done, since the company isn't planning any more secondary offerings in the next year. If the company pursues more acquisitions, it'll use its current $220 million to make the purchases. That's good, because while net income itself grew 38% as noted, the company registered only 31% growth on a diluted earnings per share level. Investors generally don't like that kind of lag.
Nevertheless, American Oriental is really in a sweet spot right now, poised to take advantage of China's new focus on rural health care. That could also be a boon to companies like Mindray Medical
Shares of Chinese stocks in general, including American Oriental, China Mobile
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Fool contributor Brian Orelli, Ph.D., doesn't own shares of any company mentioned in this article. Johnson & Johnson is an Income Investor selection. Mindray Medical is a Rule Breakers pick. The Fool owns shares of both Mindray Medical and American Oriental Bioengineering. The Fool has a disclosure policy.