Should You Cash Out On Amira Nature Food's Second Quarter Gains?

Dec. 13, 2013 8:11 AM ETCOST, RYCE
Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Long/Short Equity, Portfolio Strategy

Contributor Since 2012

Founded in 2003, has tracked hundreds of thousands of promotions by thousands of promoters and counting. Stock Promotion can be an effective and necessary tool if done correctly and responsibly, and it can be crippling to both the public company and the promoter if done recklessly. Tracks thousands of promoters. We display their compensation and we know if they are actually the ones behind that public company despite what they may or may not disclose to the public. We cut through the tape and get right to the heart of the matter. Q. What is the purpose of the promotion? Is it being done to increase shareholder and corporate value in order to better serve the public company? Or is it to create liquidity so insiders and “friendly” shareholders can unload their position? Q. Does the promoter have any "skin in the game”? Are they paid in Cash? Free Trading Stock? Restricted Stock? Will he be selling his stock, or holding it for the long term? Do they believe in the company they're promoting? Q. What can you expect form this promoter? Is this a "Pump and Dump”, or is this a gradual marketing campaign to attract new shareholders? Do you want to know who the best promoters are and who you should be following? Do you want to know who the worst is and who you should avoid like the plague? All of this and more is answered by utilizing our proprietary stock promotion tracking system which is behind the website.

Shares of Amira Nature Foods (NYSE: ANFI) traded around $15 per share before its most recent earnings report. However, the stock is now up to $16 as the company beat estimates. In September of this year, the stock traded at $7.5 per share, before making a more than 100 percent rally to trade at about $15. Since its latest report, shares surged then stabilized.

Revenue for the second-quarter of fiscal 2014 increased 36.1percent to $108 million, compared to $79.4 million for the same period in fiscal 2013. The revenue increase was primarily due to increased sales volume both in India and internationally for its basmati rice. Profit after tax for the second-quarter of fiscal 2014 increased 90 percent to $6.3 million, compared to $3.3 million in the same quarter of fiscal 2013. Basic diluted earnings per share was $0.18, compared to $0.09 for the second-quarter of fiscal 2013.

The company maintained its revenue forecast, which calls for $480 million to $507 million in sales in the fiscal year ending March 31. Analysts expect $498.8 million in revenue on average. Karan A. Chanana, Amira's Chairman and Chief Executive Officer, stated, "We are pleased to report strong second quarter financial results, as our revenue increased 36.1% and EBITDA grew 38.1%. Our results reflect our ability to consistently add new customers in India and internationally, enter new markets as well as the continued growing demand for our premium product offerings."

The company's efforts to push branded sales through channels like Costco (NASDAQ: COST) should erase concerns over the capital intensive business model that the company's operations require. Amira trades at a discounted PEG of 0.53 and a discount to its sales with a price to sales of 1.20. Currently, the company shows a price to earnings of 18.27 and has a total debt of around $149 million. Due to this, the company may find it difficult to use its cash reserve of $1.30 cash per share to boost its presence in the industry. Earnings are expected to jump 66 percent this year and 30 percent over the next five years.

Looking at the risks involved, the stock has stabilized around $16 per share. However, there will be objections to Amira as an investment idea. The company reports results by IFRS standards. Additionally, there are risks tied to India's economy. However, I'm of the opinion Amira's growth potential outweighs the risks, and the company remains a possible growth play.

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.