Hot Penny Stocks – Gulf Resources (GURE)

 

Judging from the U.S. news coverage one might think New Hampshire was the capital of the world. But the global economy does not revolve around one of the smallest states in the country.

What we should be paying attention to is the highly anticipated earnings season. This week it’s finally getting underway with companies like Alcoa (AA), Supervalu (SVU), Lennar (LAN) and JP Morgan (JPM) reporting.

Here’s a stock to check out while the rest of the country turns their attention to South Carolina.

 

QUICK FACTS
Ticker                                  GURE
Industry                               Basic Materials
Recent Price                       $2.00
Market Cap                         $69.1 m
Shares Outstanding            34.6 m
Average Volume                 125,480
Dividend Yield                     N/A
Website                               www.gulfresourcesinc.cn

 

COMPANY DESCRIPTION

Gulf Resources provides specialty materials for the oil and paper manufacturing industries. Their primary product is bromine, which accounts for 70% of the company’s income. The other 30% comes from Crude Salt and other industrial chemicals. 

Bromine has a number of industrial uses. Brominated flame retardant is the most popular commercialized flame retardant. It is popular for textiles, like fire resistant clothing for fire fighters. But most bromine is used in electronics. It can be found in circuit boards, cables, connecters, and plastic covers.
FINANCIALS

GURE’s most recent quarterly numbers were released on November 14, 2011. 

The company reported revenue of $37.8 million in the quarter. Down from last year’s third quarter revenue of $44.8 million. This is a decrease of 15.6%.  Gulf Resources also reported a net income of $5.6 million… a decrease year-over-year from a net income of $14.9 million.

As of September 30, 2011, the company reported $85.8 million in cash and long-term debt of $3.2 million.

 

KEY METRICS ANALYSIS

Trailing P/E                        1.6 x
Price / Sales                       0.4 x
Return on Assets               17.9 %
Insider ownership               39 %
Short Ratio                         11.6 x
Current Ratio                      6.7 x
Total Debt To Equity           1.3 x

 

RECENT EVENTS

In May 2011 the Chinese government requested to recall the land on one of GURE’s factories. Only the government owns land in China. The government’s stated purpose was to promote civil redevelopment. They offered the company a new parcel of land for lease nearby. The relocated factory began production in December 2011.

Gulf Resources also purchased additional Bromine manufacturing capacity. It was purchased from a private individual in China. The facilities provide an additional 3,000 tons of annual Bromine production. The new capacity increases annual production to 44,547 tons according to an independent international appraisal firm.

 

MANAGEMENT TEAM

Ming Yang – Chairman of the Board
Xiaobin Liu – CEO
Min Li – CFO
Naihui Miao – COO

 

STOCK ANALYSIS

 

 

 

 

 

Chart courtesy of stockcharts.com

Gulf’s 52-week low was $1.51 and the 52-week high was $10.40.  Right now the stock is trading at $2.00.  The 50-day moving average is near $1.97 a share and the 200-day moving average is at $2.45.  The company has a market cap of $69.1 million and 34.6 million shares outstanding.