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Brian G. Coleman is the founder of Domino Analytics (http://www.dominoanalytics.com/) a free investment research site for serious independent investors focused on emerging growth stocks. Our members include professional and individual investors, as well as engineers, technologists, physicians,... More
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  • CHINA MEDICINE (CHME): EXPECTING A REALLY BIG QUARTER
    China Medicine (CHME) is scheduled to report 2Q’09 earnings this Thursday morning, August 13. While there is no consensus estimates or management guidance for investors to base expectations on, we believe the company’s balance sheet offers some important clues as it pertains to ball-parking China Medicine’s results. And these clues lead us to believe that China Medicine is going to report a remarkably and unexpectedly strong quarter. 
     
    Our logic is as follows: in order to meet customer demand China Medicine carries inventory and also makes advanced payments to its suppliers in order to secure product. Both of these are recorded as current assets on its balance sheet and are indicative of the next quarter’s sales. The exhibit below captures the relationship between the balance sheet amounts it records as inventory plus advances to suppliers and the company’s next quarter’s sales.  

    To make the comparison easier we have simply lagged by one quarter the aggregate of these balance sheet items and compare them to the next quarter’s sales. As the chart shows, using these balance sheet accounts to forecast China Medicine’s quarterly sales would have enabled us to make fairly accurate directional forecasts about quarterly revenue as the blue and red lines in the chart generally rise and fall together.

    Using the Balance Sheet to Forecast Sales
    More »
    Tags: CHME, Healthcare, Earnings, Drugs, Growth
    Aug 11 02:10 pm | Link | Comment!
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