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I’ve thought a bit harder about the Nutracea (NTRZ.OB) situation, and frankly, I am not particularly worried about the revenue shortfall in the first quarter. Certainly the revenue numbers were well below expectations, but the explanation that a lot of orders come in toward the end of the quarter is plausible and is something that the CEO has mentioned in past conference calls. The simple fact here is that the stock has gotten way out ahead of earnings, and so it will have to come in a bit here. However, much like CSP Inc. (NASDAQ:CSPI), the fact that revenues have simply been deferred by a quarter could create an interesting buying opportunity.

Certainly, it is difficult to compare CSPI, which is sporting a P/E of 10 and 40% of the market cap in cash, with NTRZ at a P/E of 200. CSPI had less room to fall, and therefore, could be safely bought the day after the earnings release. With Nutracea, the 200 P/E might require a bit of a larger pullback, so it is probably not worth jumping in at the first sign of weakness. However, if we see the stock suffer a 20% drop today, the stock is certainly worth a look. All in all, NTRZ is a hold for the time being, and becomes a buy on any significant weakness. The growth story is still intact despite the mishap in execution this quarter, but we are going to have to be patient and let the story play out to reap the full rewards of Nutracea.

Disclosure: Author holds a position in NTRZ.OB

NTRZ 1-yr chart

NTRZ

Source: Nutracea: Growth Story Still Intact Despite 1Q Revenue Shortfall