August 18, 2010 PSW Staff |
SEC on Friday the 13th, after the bell. Although this would generally be a bad sign, for more than one reason, their results of operation caused a huge spike in the stock of about 200% by early Wednesday, despite their being a large float with 266 million shares issued and outstanding. Reality set in shortly after as the stock gave back about half of it's gains. So where does the value of this company stand after posting revenues and earnings that are over three times bigger than results from previous comparable quarters. The company had revenues of $24,852,753 during the three months ended June 30, 2010 as compared to revenues of $7,617,186 during the three months ended June 30, 2009. Heli, which is the sole marketer of AV products for the Haier Group in China, said that the increase in revenue was due to higher demand from existing customers, as well as the addition of ten new customers. Gross profit margins remained relatively unchanged. Selling, general and administrative expenses increased by about 260 thousand to close to 450 thousand. All the comparisons are similar for the six month period ending June 30, with a total of 17 new customers added. Net Earnings for the periods also more than tripled, however, their per share data needs to be looked at little more closely. It is important to note that 1 cent and 2 cents per share for the three an six month periods respectively are based on the Average Number of shares issued and outstanding. The current amount is 266 million compared to the average of 187 million, so earnings so far for the year are not 3 cents per share, but something more like 2 cents. Also, we can bet that more shares are being issued as we speak, especially with the huge spike in price, and not to mention the fact that the company has a whopping 12 billion shares authorized. The balance sheet is bad, but not horrible, and the majority of their liability's are from accounts payable of over $8 million, compared to accounts receivable of almost $12 million. Although it is probably premature to look at P/E for this stock, even if dilution is kept to a minimum, a big if, they could earn 2-3 cents per share on the year, giving the stock a kind of hybrid forward/backward P/E in the range of 2-4 based on Wednesdays closing price. Further growth in the stock would be contingent upon continued increased revenue and earnings growth coupled and a little self control on the dilution front. The stock may settle back down for a couple of months until some more proof of organic growth is revealed. |
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