Why China Green Agriculture (CGA) Stock Is Soaring Today

NEW YORK (TheStreet) -- Shares of China Green Agriculture,  (CGA)  which primarily produces and distributes humic acid-based compound fertilizers and other agricultural products, soared 33.77% to $3.05 in morning trading Friday after the company reported its fourth-quarter results.

Net sales rose 3.4% year-over-year to $72.2 million from $69.8 million, but net income plunged 70.2% to $4.3 million from $14.3 million. The company attributed this drop to "the increase in selling expenses and impairment expenses." Earnings per share declined 74.3% to 11 cents from 51 cents.

For the full year, revenue climbed 7.6% year-over-year to $233.4 million from $216.9 million, while net income dropped 43% to $25.5 million from $44.8 million.

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For the first quarter of 2015, China Green Agriculture expects revenue in the range of $50.7 million to $54.3 million, net income in the range of $5.9 million to $7.8 million, and EPS of 18 cents to 24 cents. For the full year, the company expects revenue of $254.7 million to $268.8 million, net income of $26 million to $35.1 million, and EPS in the range of 80 cents to $1.08.

More than 10.5 million shares had changed hands as of 11:23 a.m., compared to the average volume of 197,902.

Separately, TheStreet Ratings team rates CHINA GREEN AGRICULTURE INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate CHINA GREEN AGRICULTURE INC (CGA) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its revenue growth, largely solid financial position with reasonable debt levels by most measures and attractive valuation levels. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 6.7%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • CGA's debt-to-equity ratio is very low at 0.09 and is currently below that of the industry average, implying that there has been very successful management of debt levels. To add to this, CGA has a quick ratio of 2.07, which demonstrates the ability of the company to cover short-term liquidity needs.
  • 48.02% is the gross profit margin for CHINA GREEN AGRICULTURE INC which we consider to be strong. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of 10.25% trails the industry average.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 46.2% when compared to the same quarter one year ago, falling from $13.41 million to $7.21 million.
  • The company's current return on equity has slightly decreased from the same quarter one year prior. This implies a minor weakness in the organization. In comparison to the other companies in the Chemicals industry and the overall market, CHINA GREEN AGRICULTURE INC's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: CGA Ratings Report

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