Can anybody explain to me why the stock price of Lihua International (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.