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China Electric Motor Inc. (CELM)

China Electric Motor Inc. is a China-based company that engages in the design, production, marketing and sale of micro motor products through its subsidiaries, Shenzhen YuePengCheng Motor Co., Ltd. and Ningbo Heng Bang Long Electrical Equipment Co., Ltd. The Company’s products are incorporated into consumer electronics, automobiles, power tools, toys and household appliances.

Despite 48.90% year-over-year growth in revenues and continued profitability, CELM is now trading at a P/E of less than 6 (the average for the industry is approximately 28). The company is also undervalued by P/S, PEG, Price/Book and Price/Cash Flow. Currently two analysts cover the stock, one with a “Strong Buy” rating and one with a “Buy” rating. The average of their price targets is $9.50.

As of last report, the company had a very strong balance sheet with $75.9 million in total assets and $9.5 million in total liabilities. The management team has also shown great strength in efficiency, returning 28.1% on equity, 24.1% on assets and 28.1% on capital.

In most recent news, the company announced that through an indirect wholly owned subsidiary it will acquire Shenzhen Guofa Optoelectronics Co., Ltd. Through this acquisition, CELM will gain new production lines and expertise focused on high-end DC micro motors as well as a blue chip customer base. The acquisition is expected to be accretive immediately upon the closing.

Key statistics (2/4/11):

Market cap: $91.72 Million
P/E Ratio: 6.1 versus industry average of 28.0
P/S Ratio: 0.90 versus industry average of 2.33

Debt/Equity Ratio: 0.00 versus industry average of 0.67
Current Ratio:6.5 versus industry average of 1.9
Quick Ratio: 5.6 versus industry average of 1.5

Return on Equity: 28.1% versus industry average of 1.7%
Return on Assets: 24.1% versus industry average of 3.3%
Return on Capital: 28.1% versus industry average of 2.4%

Saturday, February 5th, 2011 Uncategorized
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