So I was researching international companies to invest in and came across International Paper, symbol IP. This company is turning the corner to growth, steadily increasing cash flow, and has a great business that sells its products worldwide. It looks like with so much positive cash flow recently that they might even bring their dividend back up. My mind started wondering if there was a Chinese equivalent when I stumbled on Orient Paper.
Now Orient Paper, symbol ONP, looks incredibly cheap compared to IP, only a PE of 9 compared to IP's PE of 15, and is in a tremendous growth phase right now. ONP is well off it's 52 wk high and looks better now then it did when at it's high. They are operating at a 50% margin meaning for every ton of paper it sells they double their money! ONP revenue increased almost 70% year over year last quarter and doubled gross and net profit! Can you find any other company that is putting up growth number like these, making money, and trading at only a 9 PE? This stock is a definite buy and I am starting a position as you read this.
What do you think about the boring business of paper production? Will it get better as the economy gets better? Can you find me a better option?
I usually look at the forward P/E, based on 2010 projected earnings, as the way to judge the right price for a company. Of course, growth needs to be taken into account.
ReplyDeleteONP - I couldn't find any analyst covering this one. No projections, so it's tough to come up with an estimate for the forward P/E. It also trades on the AMEX, and is not optionable, so it's touch for me to feel confident with this one.
IP - This trades at around 11 times 2010 projected earnings
http://finance.yahoo.com/q/ae?s=IP
It also trades on the NYSE, and is optionable. Therefore, I have to like this one a bit better than ONP.
Options play on IP:
Buy 100 shares for $2,300
Sell 1 July 23 call for $2.50
Sell 1 July 21 put for $1.50
Net cash outlay: $1,900
Profit if called away in July: $400 (about 20 percent)
Net entry if put to you: $20/share (about 12 percent below current value).
Let's print some money with this one!
ReplyDelete