|Written by GSCR Staff|
|Thursday, 24 April 2014 07:57|
In doing some research for today’s Market Monitor article related to finding a creative title we discovered what the saying “…Until the cows come home”, actually means.
Apparently cows are not too bright and when led out the barn will never return unless herded back in. So, “…Until the cows come home” implies never or for a very long time.
Today’s pick offers exposure to consumer staples in the growing Chinese economy that you might want to keep until the cows come home. Even with several Wall Street firms cutting Chinese GDP growth estimates for 2014 last month, conservative estimates still are above 7%. The long term picture still paints a picture of China overtaking the U.S. sometime around 2020 as the world’s largest economy.
Synutra International, Inc. (NASDAQ – SYUT - $6.02) is a U.S. based firm that produces, markets, and distributes dairy based nutritional products primarily under the Shengyuan or Synutra name in the PRC. The Company operates under four segments with a vast distribution network covering many provinces and municipalities on the mainland. It offers powdered infant and adult formula products, baby foods, supplements, and milk and whey products for industrial production customers.
SYUT is extremely attractive from a forward 5-year PEG perspective, with a ratio of 0.67, well under the magic 1.0 number. Additionally from a value standpoint, consensus analysts’ estimates for 39% and 58% growth in top line revenue over 2013 for 2014 and 2015 respectively, puts the forward P/E under 10.
Synutra International recently announced expansion into France with a deal with Sodiaal. Adding customers outside China can only serve to hedge what is a strong play on what is still one of the fastest growing economies in the world. These factors coupled with the strong value metrics make SYUT a strong pick with room to run to $8.00 by the end of 3Q14.
Disclosure: Goldman Small Cap Research analysts are neither long nor short these shares but may elect to purchase the stock within the next 48 hours.
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