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Wim Dankbaar
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See my entry on Linkedin http://www.linkedin.com/profile/edit?trk=tab_pro Owner jfkmurdersolved.com Broadcast Media industry 2003 – 2011 (8 years) Overveen owner/director Stickerstation Benelux Entertainment industry 2000 – 2003 (3 years) Amstelveen... More
  • Share Price Disconnection Of LIWA With Cash And Book Value.  1 comment
    Jul 24, 2013 10:04 AM | about stocks: LIWA

    Can anybody explain to me why the stock price of Lihua International (NASDAQ:LIWA) is so low? Am I missing something?

    The book value is 9.84 per share.

    I have always learned that if management decides to dissolve the company and distribute the assets that remain among the shareholders, the book value is what is left over for them. Of course with the thriving performance of LIWA, there is nobody even thinking about terminating the company, but if they would, you would get 9.84 per share, right?

    The cash value is 5.64. So the share price is lower than the bag of cash they are sitting on! You can buy that bag of cash for under the price of the cash! There is no debt. The PE is only 2.5. The CEO said "The best is yet to come" in the last earnings release.

    It has grown revenues by more than 50% annually over the past 4 years (from 160 million to 853 million). This qualifies as a growth stock. And most of those growth stocks are not even profitable like Lihua is. Yet they have Price/Sales ratios of over 10. How does this compare to Lihua's PS ratio of 0.17 ? Normally such a stock should be above 30 instead of 5. So what am I missing? Is this Mr. Market being stupid for the time being? Or what is the catch? I don't get it. Somebody help me please!

    Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in LIWA over the next 72 hours.

    Stocks: LIWA
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  • David Addison
    , contributor
    Comments (222) | Send Message
     
    Dear, Waston. What facts would explain things?

     

    If LIWA's management were liars, that could reasonably explain things. It wouldn't be the first Chinese company to scam foreign investors.

     

    It could also have nothing to do with LIWA in particular, but to the fact that many other Chinese companies have scammed foreign investors. While many of these low hanging frauds have probably already been identified, thanks to short-sellers (no thanks to the SEC). The bad apples have spoiled the perception of the good.

     

    Which explanation is more likely? I don't know, but I do bet that there is a lot of money to be made and lost by trying to determine who's who. The only exception to this assessment would be that Chinese companies who list stock in the U.S. are all frauds.
    30 Aug 2013, 07:19 PM Reply Like
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