Update: Amira Nature Foods - Huge Run With More To Go?

Sep. 3.14 | About: Amira Nature (ANFI)

Summary

The company crushed fiscal 1Q earnings consensus by 56%, sending shares soaring.

We still have a bullish thesis on the stock given the company’s stronghold on the basmati rice market.

The recent quarterly beat, although a bit more robust than expected, was in-line with our expectations.

Amira Nature Foods (NYSE:ANFI) posted fiscal 1Q earnings of $0.26 a share (topping $0.16 consensus) and revenues were $139 million (besting $131 million consensus). Shares have soared 16.5% since announcing earnings. Fiscal 1Q revenues were up 26% y/y and adjusted EBITDA was up 31%.

The company noted that it saw continued growth in its core Indian and Middle Eastern markets. But it also noted that developed markets are gaining traction, such as the U.S., U.K. and Europe.

Shares are up close to 140% since we first covered the stock in August of last year, noting at the time that the short covering was just getting started. As we noted in August,

Based on its current metrics, Amira is unreasonably cheap. When you combine that with the growth potential for its basmati rice and organic products, you get a very cheap growth company. We think the company's stellar earnings report has caught the shorts off-guard and we see further upside from short-covering alone. The stock's average 3-month volume is only 119k shares and its average daily volume is 96K. Meanwhile, the short interest on the company is 22%, or around 2 million shares shorted -- putting the days to cover at 20, so there's definitely a further squeeze in the making here.

Despite blowing through our $13 price target, shares are still attractively valued. Shares trade at just 10x next year's earnings and its PEG ratio is a mere 0.4. Its short interest has spiked to 44%. However, the case remains that the company has international expansion opportunities and lacks any real competitors for basmati rice.

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