Orient Paper: Good Value Play

Third-quarter earnings are now behind us, so I thought it would be useful to give a recap of the performance of a few names I follow to see how they've done and what their prospects look like.

I have been a big fan of Orient Paper (ORPN Quote), and I'm liking the stock more every day. Even with my high expectations for the company, I was blown away by the company's spectacular third-quarter numbers. And apparently the market agreed with me.

Orient Paper: Factory Tour

Numbers were released after the close of trading last Friday, and on Monday the stock shot up as much as 31% to a new high of over $10. Keep in mind that when I first wrote about this "boring stock" a few weeks ago (in comparison to hot initial public offering A123 Systems (AONE Quote)), the stock price was only a split-adjusted $4.40. Normally, I would take an opportunity like this to take a few shares off the table, but in the case of Orient Paper I didn't sell a single share because I still think the best is yet to come.

Third-quarter revenue increased 67% from the same quarter last year and 36% from the previous quarter. Better yet, gross profit and net income both increased a whopping 107% from the previous year. Gross margin for the quarter was 23%. Growth like this means that looking at the backward-looking price-to-earnings on financial Web sites is meaningless. Google Finance still shows a P/E ratio north of 10, but at a market cap of $111 million vs. quarterly earnings of $4.8 million, a real P/E is about five times, assuming the company can continue at this level with no growth.